Saturday, October 16, 2010

Foreclosure Crisis - #2279 - Mortgage Damage Spreads - Wall Street Journal

The unfolding foreclosure-processing debacle is causing bank stocks to slide and putting millions of delinquent borrowers in limbo.    But how disruptive the crisis ultimately becomes—for homeowners, the housing market and the broader economy—depends on how quickly a number of technical problems and legal challenges are resolved in the months ahead.In essence, fast-paced modern finance is colliding with the much slower machinery of the U.S. legal system. While finance aims for efficiency and maximized profits, the courts demand due process. And that's becoming a growing issue as lenders come under attack for taking short cuts to oust homeowners who haven't mailed in a mortgage check for months.Banks stocks were hammered on Friday for the second straight day as investors continued gauging the sector's exposure to higher operating and legal costs. Bank of America Corp. shares lost nearly 5%. Shares of Wells Fargo & Co. also fell nearly 5%, while J.P. Morgan Chase & Co. fell 4% and Citigroup Inc. lost nearly 3%. And the cost of protecting against the default of bank bonds continued to surge.  Read more......

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