The steep losses on sales of foreclosed homes are painful for banks and investors in the short run but should help clear the backlog. That would allow for an eventual recovery of the housing market and clean up the banks' balance sheets.
One example of the deep price cuts on foreclosures: A 1,230-square-foot home in Corona, Calif., was sold by a unit of investment bank Credit Suisse in June for $198,000, down from $450,000 when the property sold in a regular transaction in December 2006.
"I do not think this is the time to be holding onto [foreclosed homes] and hoping for a better day," Daniel Mudd, chief executive of Fannie Mae, said during a conference call Friday.
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