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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: CalculatedRisk who wrote (211841)7/22/2009 5:39:00 PM
From: Giordano BrunoRead Replies (2) of 306849
 
Subprime-Mortgage Loss Forecast Is Raised by Standard & Poor’s

By Jody Shenn

July 22 (Bloomberg) -- Standard & Poor’s again boosted its projections for losses from U.S. subprime mortgages backing securities, reflecting increasing delinquencies and defaults amid slumping home prices and growing unemployment.

Losses on loans backing 2006 securities will reach an average of about 32 percent of the original balances, while losses for similar 2007 bonds will total about 40 percent, the New York-based ratings firm said in a statement today. In February, S&P said the losses would total an average of 25 percent for 2006 bonds and 31 percent for 2007 securities.

Rising defaults on subprime mortgages since 2006 helped spark what Federal Reserve Chairman Ben S. Bernanke today told Congress might have become “the worst global financial crisis since the 1930s and perhaps including the 1930s.” The loans went to borrowers with poor or limited credit records or high debt.

Rating companies have cut all but 16 percent of U.S. home- loan securities without government backing to grades below AAA since late 2007, when 80 percent of the debt carried top rankings, according to an investor letter last month from Los Angeles-based TCW Group Inc.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: July 22, 2009 16:44 EDT
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