Banks reporting PHANTOM INCOME on delinquent mortgages!!!!!!!!!!!!!

Discussion in 'Economics' started by S2007S, Jan 13, 2011.

  1. S2007S


    Amazing isnt it, how banks can take phantom interest that is not collected and book it as income until the actual foreclosure takes place. Talk about trying everything possible and coming up with anything possible to help these banks not have to report these losses. When do the games and manipulation stop, this is not a free market.

    Robert Lenzner

    US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages

    Jan. 12 2011 - 8:36 am | 3,620 views | 0 recommendations | 13 comments

    The giant US banks have been bailed out again from huge potential writeoffs by loosey-goosey accounting accepted by the accounting profession and the regulators.

    They are allowed to accrue interest on non-performing mortgages ” until the actual foreclosure takes place, which on average takes about 16 months.

    All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.

    This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.

    Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.

    The potential writeoffs could be even larger should home prices continue to weaken, placing more homes in the nomnperforming category on bank balance sheets.

    About 6 million homes are still at risk, according to Schnapp, and at least 10% of them are 25% underwater, meaning their market value is 25% less than the mortgage– but the owners are still paying interest to their banks.
  2. Other industries make paper parts and report them as items on there inventory sheets. It is the same bussiness strategy that even though the concept of paying forward or clawing back. Realtime accounting accuracy means less than a "happy" distorted view of the current situation. Clean the the &%^ing books off and face actuality. Whatever!!!

  3. SunBeam used to sell/book sales of products they would store in a huge gotta love it.
  4. the1


    The US Economy is beginning to resemble a small family-owned business. There are a set of rules for the family - high pay, short hours, babes and booze - and a set of rules for everyone else - low pay, long hours, an atta-boy on your birthday.

  5. That pretty much sums up all economies and societies trough out human history. The trick is to become part of family, and it is possible though obviously very difficault.
  6. LEAPup


    The US economy seems to resemble the ultimate Ponzi these days...
  7. According to some, The Bernank has pumped $11 T-R-I-L-L-I-O-N into the economy of the US and others. (Do we all realize... that's 4-TIMES the current annual tax revenues of the Federal Gummint?)

    Somebody ought to get SOME kind of party out of all that...
  8. LEAPup


    Sooner or later every Ponzi blows up... i.e., runs out of money to keep up the scam. Scary stuff!
  9. jinxu


  10. S2007S


    Nothing like looking at on a daily basis, breaks everything down into great detail.

    Why people continue to ignore the trillions in debt this economy is in is beyond me, raising the debt ceiling is just another laughing matter we will have to contend with in the next 2 months, they will raise it probably to $15.5-$16 Trillion!!!!
    #10     Jan 13, 2011