Delinquencies Sprout Like Weeds; Fuel Doubts About Some Firms

June 6, 2008

Adverse news continues to sprout describing the expansion of delinquencies into new corners of the US bank and thrift portfolios. The Mortgage Bankers Association reported that 1Q2008 mortgage delinquency and foreclosure rates continued to expand above 4Q2007 levels and are now dramatically higher than 1Q2007. In the same news day, reports of residential construction loan delinquencies with massive potential write downs are affecting several large banks. Beyond the residential market, other bankers are feeling the pinch around their credit card, small business, and commercial real estate portfolios.

Our ongoing analysis of the impact on banks and thrifts updates the impact of these latest developments. How many forced transactions (e.g., Countrywide – Bank of America) or outright failures are likely? Which institutions are closest to the edge?

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