11-27-2013, 01:23 PM
More than four years after the worst financial crisis in the US officially ended, a new wave of mortgage trouble appears to be threatening the American banks again, a report says.
In an in-depth article released Tuesday, Reuters reported a worrying rise in the number of US borrowers who are increasingly missing payments on home equity line of credit they took out during the housing bubble, which led to the Great Depression of 2008.
This trend, the report said, could deal another blow to the US biggest banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc., and JPMorgan Chase & Co., which have more than $10 billion of these home equity lines of credit on their books each.
Within the next four years, more than $221 billion of these loans at big banks will hit a 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.
According to the report, US banks marketed home equity lines of credit aggressively before the housing bubble burst. Now the financial giants fear that higher interest rates among other economic problems could make Americans to eat deeply into their earnings and potentially cut into their equity levels, causing major problems for the banks at a time when they are under pressure to boost capital levels.
The report warned that consumers’ payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.
Borrowers are delinquent on about 5.6 percent of loans made in 2003, a figure that could rise to around 6 percent this year, which is a big jump from 2012, when delinquencies for loans from 2003 were closer to 3 percent.
At the time of receiving the loans, consumers were also too happy as they could use the cheaper version of credit card debt to pay for vacations and cars. But now, given the new rate of interest rates, a typical consumer’s monthly payment could be more than tripled.
"We just don't know how close people are until they ultimately do hit delinquencies," said Darrin Benhart, the deputy comptroller for credit and market risk at the Office of the Comptroller of the Currency. Banks can get some idea from updated credit scores, but "it's difficult to ferret that risk out," he said.
The report underlined that the mortgage bubble that formed in the years before the financial crisis is still hurting banks, even seven years after it burst.
“By many measures the mortgage market has yet to recover: The federal government still backs nine out of every ten home loans, 4.6 million foreclosures have been completed, and borrowers with excellent credit scores are still being denied loans,” the report said.
Last week, JPMorgan Chase & Co. agreed to a $13 billion settlement with the US government over charges it overstated the quality of home loans it sold to investors
http://www.presstv.ir/detail/2013/11/26/...-us-again/
In an in-depth article released Tuesday, Reuters reported a worrying rise in the number of US borrowers who are increasingly missing payments on home equity line of credit they took out during the housing bubble, which led to the Great Depression of 2008.
This trend, the report said, could deal another blow to the US biggest banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc., and JPMorgan Chase & Co., which have more than $10 billion of these home equity lines of credit on their books each.
Within the next four years, more than $221 billion of these loans at big banks will hit a 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.
According to the report, US banks marketed home equity lines of credit aggressively before the housing bubble burst. Now the financial giants fear that higher interest rates among other economic problems could make Americans to eat deeply into their earnings and potentially cut into their equity levels, causing major problems for the banks at a time when they are under pressure to boost capital levels.
The report warned that consumers’ payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.
Borrowers are delinquent on about 5.6 percent of loans made in 2003, a figure that could rise to around 6 percent this year, which is a big jump from 2012, when delinquencies for loans from 2003 were closer to 3 percent.
At the time of receiving the loans, consumers were also too happy as they could use the cheaper version of credit card debt to pay for vacations and cars. But now, given the new rate of interest rates, a typical consumer’s monthly payment could be more than tripled.
"We just don't know how close people are until they ultimately do hit delinquencies," said Darrin Benhart, the deputy comptroller for credit and market risk at the Office of the Comptroller of the Currency. Banks can get some idea from updated credit scores, but "it's difficult to ferret that risk out," he said.
The report underlined that the mortgage bubble that formed in the years before the financial crisis is still hurting banks, even seven years after it burst.
“By many measures the mortgage market has yet to recover: The federal government still backs nine out of every ten home loans, 4.6 million foreclosures have been completed, and borrowers with excellent credit scores are still being denied loans,” the report said.
Last week, JPMorgan Chase & Co. agreed to a $13 billion settlement with the US government over charges it overstated the quality of home loans it sold to investors
http://www.presstv.ir/detail/2013/11/26/...-us-again/