Are Banks Slow-Rolling Foreclosures to Avoid Losses?

BY Business Desk  December 11, 2009 at 11:43 AM EDT

foreclosure; file photo

Question: It seems that banks are slow-rolling foreclosures to avoid recognizing losses. This would imply their balance sheets are weaker than stated. Is the FDIC concerned about this?

Paul Solman: I haven’t been in touch with FDIC head Sheila Bair since our extensive interview with her a few weeks ago (when she also answered YOUR questions), but I can’t imagine she isn’t concerned.

As we’ve reported, a great many of the diciest residential mortgages are scheduled to have their rates reset starting this spring. If those rates go UP, more homeowners are likely to find themselves in default. And if you’re worried about the banks, don’t forget all the commercial real estate mortgages facing adjustable rates, as we reported in October. (If you don’t think commercial real estate is a looming problem, look what happened recently in Dubai.)