Fabulous graphic from an article at itulip.com:
Quote:
|
As for posting earnings that should remain on the books as recievables, it is at least intellectually dishonest unless they have calculated in an expected default rate.
|
Well, you can put them down as intellectually dishonest, because several lenders are actually reducing reserves for defaults. They cite that a portion of their portfolio is refinancing into a new mortgage. Smaller portfolio means fewer defaults, right? Not quite. The ones who are refinancing are ones with the ability to refinance, leaving those who don't want to refi or those who CANNOT refi. Portfolio quality may actually be deteriorating.