According to new research by ""Standard & Poor's"":http://www.standardandpoors.com released this week, $250 billion of securitized mortgages are presently in bankruptcy, foreclosure, or REO, and the company says the performance of private-label securities - those that banks keep on their books - are expected to decline even further.
S&P analysts forecast new losses from legacy residential mortgage-backed securities (MBS) to total at least $260 billion. They said in a worst-case economic scenario, future losses could reach upwards of $375 billion.
S&P calculated that U.S. banks continue to hold $1.7 trillion dollars in private-label mortgage securities on their books. Within these mortgage pools, analysts said they expect to see a minimum of $165 billion in losses from subprime MBS, $80 billion from Alt-A, and $5 billion from securities backed by prime loans.
S&P said in the report, ""We believe these loans will keep continued downward pressure on housing prices.""
Despite the additional losses expected, Michael Thompson, managing director of S&P's market, credit, and risk strategies group and author of the report, offered an optimistic prognosis. He told the _""Wall Street Journal"":http://www.wsjonline.com_, ""There are going to be more defaults, but the worst of the big downward lurches are probably over and the systemic threat from the residential mortgage market is diminished.""