Loan Loss Reserves Set to Boom?

The third quarter earnings season is almost upon us and there's increasing speculation that loan loss reserve set-asides in regard to delinquent residential loans may boom. The primarily culprit here will be re-defaults on modified loans. There's also increasing talk that some banks are throwing in the towel on modifications and will crank up their foreclosure departments. (Of course, if the megabanks/mega-servicers do crank up foreclosures they should step gingerly. Thanks to the 'GMAC Foreclosure-gate' scandal many state attorney generals are getting ready to pounce.) A recent report from M. Hanson Advisors notes that, "I am fairly confident that several of the large banks have broken ranks, are in heavy foreclosure/property liquidation mode, and are purposely front-running investor loans, such as the GSE's, for which they only provide the loan servicing/loss mitigation function"…