SOURCE: Simba Information

Simba Information

March 04, 2009 09:29 ET

US Loan Default Rates Will Keep Rising Until Mid-2010

STAMFORD, CT--(Marketwire - March 4, 2009) - has announced the addition of TowerGroup's new report "The US Mortgage Banking Crisis: Ripple Effects and Global Realities," to their collection of Banking & Financial Services market reports. For more information, visit

The US subprime mortgage crisis developed from a perfect storm of the Federal Reserve's loose policy on interest rates, skyrocketing home prices, and easy money provided by investment banks and money center banks.

The global credit and liquidity crisis was caused by not only subprime mortgages but also financial services institutions' (FSIs') overleveraged balance sheets, deregulation, credit derivative product losses, and weaknesses in rating agency processes.

The US mortgage banking industry, which lost an estimated $1.1 billion (USD) in 2007, will likely lose $5.3 billion in 2008 and will not return to profitability until 2010 at the earliest.

US loan default rates will keep rising until mid-2010, and the resulting financial losses will continue to dampen US mortgage IT spending, which TowerGroup forecasts to increase at a 1.6% compound annual growth rate (CAGR) from 2007 to 2012. Europe, the global region that is feeling the second-biggest negative impact from the economic upheaval, had a 39% share of global FSI writedowns and losses through September 30, 2008.

Because the United Kingdom is the largest European country in which subprime mortgages are originated (rather than purchased from abroad), its problems cut across many FSIs instead of just a few large, problem FSIs as in other EU countries.

Report Coverage
Trends and Outlook for the US Mortgage Market
       Exhibit 1
Deeper Causes of the Mortgage Crisis: Risky Mortgage Products
       Exhibit 2
Impact of US Mortgage Lending on Global Finance
       Exhibit 3
       Exhibit 4

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