Mortgage News

Today's Wall Street Journal features an article that reports that five of the biggest credit unions in America are getting hit by the mortgage mess. They lost a combined total of $5.7 billion in unrealized losses, meaning that the houses their mortgages are on have lost $5.7 billion in value without being successfully sold and the mortgage paid off.

Optimists such as Kent Buckham, director of the office of corporate credit unions for the National Credit Union Administration, the federal regulator, are saying that this will all work itself out once the real estate and mortgage industries recover, but pessimists and industry critics are very concerned that credit unions and their regulators are underestimating just how serious the whole mortgage mess is.

The unrealized losses exceed the entire net worth of the five credit unions mentioned in the article: U.S. Central Federal Credit Union; Western Corporate Federal Credit Union; Members United Corporate Federal Credit Union; Southwest Corporate Federal Credit Union; and Constitution Corporate Federal Credit Union. The WSJ article suggests that Buchham thinks that the current real estate market is priced unrealistically low. So if the market doesn't rebound the way Buckham expects, these five credit unions are in serious trouble.

I have repeatedly expressed the opinion that this mortgage crisis isn't done and that the real estate market hasn't bottomed out yet. I continue to stand by that evaluation. I don't think the market will have reached bottom (where it will then reach its true equilibrium) until prices drop another 30-40% or so. If I'm right, this credit union news is one more indication that our economy as a whole is in big trouble.

I hope I'm wrong, but I don't think I am!