Real Estate Toxic loans selling

With problems in the residential and commercial real estate markets continuing, some lenders have been selling off their most troubled assets in recent months. Loan sales are hardly new to the banking industry. Lenders will often sell both good and bad loans to make sure they aren't overexposed to any one particular asset class, but in recent months lenders have increasingly looked at loan sales as borrowers struggle to stay current. In one telling indicator, banks sold nearly $1 trillion worth of 1-4 family mortgages over the second and third quarters, according to SNL Financial, more than twice the amount sold during the 2007 when the U.S. housing market was first starting to show signs of strain. Most banks have resisted selling their most troubled loans altogether out of fears that the sales could trigger severe losses. "The problem is that banks are facing rather difficult capital problems these days and can't take the losses involved," said Laird Minor, a managing director at Nautilus Capital. Only a handful of deals have taken place as part of the Public-Private Investment Program (PPIP). Of course, some banks are holding out hope that the U.S. economy is indeed pulling out of recession and that their loan portfolios will recover in value -- a bit of a bet since last week the government reported that the nation's unemployment rate soared above 10% for the first time since 1983, suggesting that some loans will only continue to deteriorate in value.