Loan Modification

We described this transaction in The IRA Advisory Service this week, including why we believe this settlement is not the end of the story on Fannie exposures for BAC -- despite what BAC told analysts. Read the Fannie Mae press release kiddies, then re-read the BAC call transcript. Wuz we lied to about the settlement covering all of the Fannie exposures during the Q&A? BAC IR won't let us ask questions on the call, so we could not ask for a public clarification.

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If the Treasury and Congress confront the underwater homeowner issue with principal reductions, write off the underwater second liens, and align the servicers with the borrowers, then the economy will get better much quicker. In a scenario of deliberate restructuring of borrowers and banks, the housing market can come back, labor mobility will improve and the banks (which will need some sort of recapitalization to withstand all of that truth at once) will be able to lend again.