Report: Troubled Mortgages Still Plague Banks

WSJ - June 29, 2011

The nation’s banks are holding a much higher rate of defaulted mortgages on their books than mortgage giants Fannie Mae and Freddie Mac, according to a report released Wednesday by the Office of the Comptroller of the Currency, which regulates national banks.

The report said that some 19.7% of mortgages held in banks’ portfolios were delinquent at the end of March. By contrast, nearly 6.8% of mortgages backed by mortgage giants Fannie Mae and Freddie Mac were nonperforming, and 11.4% of all mortgages that are serviced by banks.

Nevertheless, Fannie Mae and Freddie Mac are more crippled than the biggest banks because their holdings of mortgages are so large, they held little capital, and they don’t have other business lines to offset mortgage losses. Fannie and Freddie guarantee more than $5 trillion in mortgages, double the amount held by all of the nation’s banks and thrifts.

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