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Banking

Congress warns of foreclosure risk to US banks

As the Tarp oversight panel warned this week that the foreclosure crisis could lead to the unwinding of a raft of US securitisations, Euromoney quantifies the $180 billion black hole that threatens many of the country’s largest banks

The Congressional Oversight Panel on Tarp called for new stress tests on the biggest US banks this week as it warned that the foreclosure crisis could lead the unwinding of much of the US RMBS market.


The extent of the potential redemption disaster – which in the worst case could total as much as $180 billion – was first revealed by Euromoney in its November cover story.


The panel warned: “The potential for further instability among the largest banks raised the spectre of another acute crisis like the one that hit the markets in the autumn of 2008. If investors come to doubt the entire process underlying securitisations, they may grow unwilling to lend money to even the largest banks without implicit or explicit assurances that taxpayers will bear any losses. Further, banks could, in the worst-case scenario, suffer severe direct capital losses due to putbacks.”


As Euromoney said this month: “The cost to banks of buying back delinquent deals could be as high as $180 billion – 30 times as much as current projections made for the foreclosure crisis.”


Read Euromoney’s groundbreaking story in full:



Securitization: Mortgage banks hit by putback time bomb

November 2010

That banks and mortgage servicers may have foreclosed on US homes without adequate documentation further blackens their already tarnished reputations. But the foreclosure scandal has increased the prospect of a far greater attack on mortgage securitization – one that even if it does not destroy the market altogether could cost the banks as much as $180 billion. Helen Avery, Louise Bowman and Peter Lee report.



Editorial: US mortgage mess hits government credibility

Securitization stuffs the seniors - again

US foreclosures: Between a rock and hard place

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