Source of House Data Skews Loan Losses

Wall Street Journal (05/08/08) P. C6; Eckblad, Marshall
Wachovia Corp. and Washington Mutual Inc.'s respective mortgage losses might not be as steep as those at competing lenders, with both firms citing housing data from the Office of Federal Housing Enterprise Oversight (OFHEO) when detailing their exposure to the U.S. residential property market. The S&P/Case-Shiller Home Price Indices, a different index relied on by rival banks, is significantly more pessimistic. Housing economist Thomas Lawler notes that using one set of numbers over another in calculating loan-loss assessments can make "a huge difference." An unnamed Wachovia spokesman says the choice was easy considering that OFHEO's data more closely resembles the bank's book of mortgages, which includes loans of "lower average loan size and higher average owner equity."