Optimists hoping the NCUA's estimated $5.9 billion corporate stabilization price tag is too high received bad news during the regulator's webcast this afternoon: losses on mortgage backed securities could climb even higher.
Temporary moratoriums on foreclosures artificially capped foreclosure activity late last year and in early 2009, but those moratoriums have since been lifted, and the foreclosure rate is ticking up as a result, said Office of Corporate Credit Unions Director Scott Hunt.
In particular, Option ARMs will transition during 2010 from minimum payments to amortizing payments, increasing monthly mortgage payments as much as 100% for some homeowners. Adding insult to injury, Option ARMs typically required low down payments, so few homes have the equity to support the outstanding mortgage balance.
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"We don't like reporting these results, but the recovery prospects are not good in the near term," Hunt said.
U.S. Central and WesCorp have each trimmed more than $10 million from their operating budgets, and other corporates have also made "sizeable cuts," he said.
"Corporates are trying to become as efficient as possible and protect capital as best they can," Hunt said.
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