Big Banks' Late Pays Surge as Problem Ginnie Loans 'Rebooked'

Major banks "rebooked" $19 billion in seriously delinquent Ginnie Mae loans in the fourth quarter and pushed the percentage of single-family loans held by FDIC-insured institution that are 90 days or more past due up to 9.3%, from 8.1% in the previous quarter. The Federal Deposit Insurance Corp. reported that banks and thrifts held $178.5 billion in single-family loans that are seriously delinquent or "noncurrent" as of Dec. 31, up $23.2 billion or 15% from the third quarter. "Most of this increase — $19.1 billion — consisted of rebooked GNMA loans that have government guarantees," the FDIC says in its fourth-quarter report on bank performance and earnings. FDIC economists have never seen such a jump in rebooked Ginnie Mae loans before. Rebooking is an accounting convention that requires banks to recognize loans that are seriously delinquent even though it is not an indicator of significant losses. Ginnie Mae securities are mostly back by Federal Housing Administration-guaranteed loans. The FDIC also reported that banks and thrifts charged off $10.1 billion in single-family loans in the fourth quarter, up 6.8% from the previous quarter and 48% from the fourth quarter of 2008.