http://online.wsj.com/article/SB10001424052748703843804575534303696918076.html
This is bleeding the banks all by itself.
They have to continue to service the bond payments with a massive loss of income to do it.
Just say NO to TARP II.
For mortgage investors, the recent suspension of foreclosures could potentially cause further losses in the already-battered $2.8 trillion market for residential mortgage-backed securities.
When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.
The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.
Not surprisingly, senior debt holders want banks to foreclose faster to reduce expenses
