It's possible that I'm misinterpreting this (anyone disagree with my math? it seems pretty simple) - let's look at the story:
"WASHINGTON (AP) -- The Federal Deposit Insurance Corp. has sold $490.7 million in troubled mortgage loans from 19 banks that failed between August 2008 and March 2009 as it works through an inventory of assets from the institutions it has taken over.
The FDIC said Thursday that the winning bidder in its auction, Charlotte, N.C.-based Roundpoint Mortgage Servicing Corp., paid $34.4 million for a 50 percent stake in a new company set up to hold the home mortgage loans. The FDIC has the other 50 percent."
I whipped out my HP-12C (yeah mofo's - I still have it!) and did some math.. If $34.4MM bought 50% of the holding company, that implies that the total value is $68.8MM. If the face value of the assets is $490.7MM, then $68.8MM is 14c on the dollar! Also known as 14%.
Now what's the point? For me it's this: the crisis was never about liquidity - it was about SOLVENCY! If it had been a (temporary) liquidity problem, these loans would be worth a whole lot more than 14c on the dollar now, two years later. So called temporarily dislocated "fire sale prices" that people were blaming for driving financial firms to bankruptcy were not fire sale prices. They were real, true, prices.
So, the article notes that these loans in question were mostly in Arizona, Florida and Georgia, some of the worst areas of the housing bust, with the highest numbers of failed banks. Again, I interpret two things: 1) I find it impossible to believe that banks have taken all the losses they will need to take on real estate loans and 2) I can't imagine we've seen the bottom in home prices.
Disclosures: short XLF, long a house.