A January 5, 2012 article by Callahan's Chip Filson entitled:
"NCUA’s Seizure Of $50B In Corporate Assets Still Unaccounted For
A new audit shows the NCUA Corporate Resolution Plan cost credit unions almost $1.5 billion more than previously reported."
Brought the following comment from the CEO of a multi-billion dollar credit union:
Chip, we all know that this is going to cost the industry far more than "current" loss estimates. While there are presentation dynamics being used to help people avoid being blamed, the current estimate are also wrong because no one can know the ulimatel cost.
There are 4 million mortgages in some form of serious delinquency and/or foreclosure right now. These losses have not yet occurred yet. And once these foreclosure move through the system real estate prices will continue to fall and that will cause more losses because thereby creating a feedback loop that will spiral for a while. Taking view of the entire housing problem today in the U.S., there are 300 thousand homes per month being foreclosured while there are only 100 thousand homes being liquidated per month. This means that the REO stock will grow for the next couple of years and prices will continue to adjust to clear the market.
NCUA's conserved credit union's investment hold this type of collateral and so the current estimates very likely do not capture this dynamic, non-linear future described above.
So like most people with their pants on fire, they will do everything the can to make it look like the fire is under control and that the loss estimates are correct. But they can't know until it arrives and the losses that they are estimating have not arrived yet.
Thanks for calling this to our attention. I expect you will have ample opportunity to report on this for the next several years as NCUA comes to realize that the problem they inherited by a bubble in the housing sector is much larger than they could have ever imagined.