home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News


Mortgage News

HOT Topics









site map

twitter linkedin
facebook google+

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.

Subprime Banks Biggest Risk, FDIC Says

Report says specialized lenders not adequately hedged

April 15, 2002


The biggest single near-term risk to insured institutions appears to be subprime consumer lending, according to a report by the Federal Deposit Insurance Corporation (FDIC). "Economic Conditions and Emerging Risks in Banking" was delivered to the FDIC Board of Directors last week.

In its announcement, the FDIC said that around 160 FDIC-insured institutions representing 6.3% of the industry's assets have been identified as having subprime consumer or mortgage loans greater than 25% of Tier 1 capital. The FDIC said this group has contributed disproportionately to recent bank failures and additions to the FDIC Problem Bank List.

The FDIC said that in addition to experiencing higher loan losses than prime lenders, subprime lenders have recently been noted by FDIC examiners and other regulatory sources to be using credit models that underpredict actual losses.

According to the FDIC, the report describes recent signs of a consumer-led recovery in the economy -- which may have begun in the first quarter. However, weakness in corporate profits, declining business investment, overcapacity in key industry sectors, rising commercial real estate vacancies, and high debt loads for consumers and businesses could dampen the economic recovery or even lead to another recession, the FDIC said.

The FDIC noted that recent growth was partly fueled by refinance mortgages that may not recur in the near term. The FDIC cited the Federal Reserve Flow of Funds data where the Fed said that volume of mortgage and consumer debt outstanding rose by almost $1.2 trillion between year-end 1999 and 2001.

According to Freddie Mac's recent economic forecast, refinances will fall from 2001's roughly $1 trillion level to about half that in 2002. However, it is likely that the drop in "cash-out" may not be as steep as the drop in overall refinances because of ongoing home equity-funded consumer expenditures that occur regardless of mortgage rates.

The FDIC said weaknesses in bank and thrift credit quality during 2001 were generally concentrated in states along the upper and lower Mississippi Valley that rely heavily on manufacturing and have experienced the longest period of economic weakness. However, during the second half of 2001, the FDIC said that the economic slowdown began to spread to metropolitan areas outside the central U.S. that have higher employment concentrations in information technology and financial services. Commercial real estate markets in many of these metropolitan areas deteriorated rapidly during 2001.

The FDIC also expressed concern over an increase during the late 1990's in banks with high loan concentrations of commercial & industrial and commercial real estate, which tend to fail at a significantly higher rate than other insured institutions.

Also of concern was the significant number of specialized mortgage lenders that have not hedged their interest rate risks even though the recent refinance wave has increased their concentrations of these loans. As a result, smaller institutions are more vulnerable to rising rates.

Sam Garcia has been in mortgage lending since 1980, and is managing editor of MortgageDaily.com. He also owns and operates CloseNow.com, a real estate portal site.

email: [email protected]

Copyright © 2002 Sam Garcia

hosted by USANow.net

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders