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If these delinquencies are already reserved, then there is potential for some of the loss to be reversed on the GSE books.This is a bigger deal than Greece, by the way.
I'm having trouble digesting your statement:"If these delinquencies are already reserved, then there is potential for some of the loss to be reversed on the GSE books."Please clarify. TIA
Fannie and Freddie have been reserving 40% haircuts on all of their delinquent loans.If you read the past few 10Q filings, the charge-offs against the loans have been very low and the reserves keep growing. This is evidenced by the fact that the cash balance continues to grow as well.Read John Hempton's blog. He spells it out.http://brontecapital.blogspot.com/2009/11/fannie-maes-results-oh-and-what-if-bank.htmlIf they find a way to deal with these loans for less than the reserve amount, they will recognize gains.However, the banking system might be doing the buying and taking the losses.