Delinquent Mortgages Continue to Threaten U.S. Banks
by Weiss Ratings | July 28, 2011
If you’re like most of us, you have money in a bank ... a checking account, a savings account or perhaps a CD. So you may want to pay close attention to a study we just completed on the financial health and safety of the nation’s largest banks.
We reviewed 218 large banks and thrifts holding $500 million or more in single-family mortgages and analyzed the percentage of problem loans to capital plus loan loss reserves1. This ratio measures how much of an institution’s capital is at risk from loans that are unlikely to be repaid. It’s also a leading indicator of a bank’s overall financial vulnerability.
Here’s what we uncovered:
Among the largest mortgage lenders — MetLife Bank, California Bank & Trust, plus three Bank of America subsidiaries have the greatest exposure to nonperforming mortgages. In fact, they reported that more than 42% of their capital is at risk from troubled mortgages as of March 31, 2011. In contrast, Citibank, the fourth-largest mortgage lender in the country with $83 billion in mortgages on its books, reported only 6.7% nonperforming loans to capital plus reserves.
As you can see in the table below, the three Bank of America regional subsidiaries with 42% or greater exposure are in Rhode Island, California, and Oregon, with nonperforming mortgages of 63.7%, 53.2%, and 42.2% of capital, respectively. Furthermore, these subsidiaries, along with a fourth (in North Carolina) hold an additional $11.4 billion in mortgages that are 30-89 days past due as of March 31, 2011, indicating still more problems on the horizon.
Large Banks with Most Mortgage Exposure
Martin Weiss had this to say about the findings:
"Bad mortgages continue to represent a serious threat to some of the largest players in the banking industry as consequences from the real estate bubble continue to play out. With unemployment still high, many borrowers face mounting financial pressure, increasing the likelihood of default.”
Want to learn more? Check out the full list of 25 large banks with the most mortgage exposure and their Weiss Financial Strength Rating. You can also review the complete list of Weiss Ratings’ strongest and weakest banks.
Your bank just might appear!