FDIC: Mortgage Portfolios See Growing Delinquencies, Charge-Offs

Residential mortgage loan charge-offs soared 197.8 percent during the fourth quarter, according to a new report from the FDIC, which highlighted growing distress in U.S. mortgage markets. Residential mortgage loan charge-offs increased by $590 million in the fourth quarter of 2006, compared to 2005 levels.

Commercial and industrial loans saw a $156-million (12.6 percent) increase in charge-offs, representing a 12.6 percent increase, the FDIC reported. Net charge-offs soared even higher on home equity lines of credit and real estate construction and development loans, up 102.6 and 455.5 percent, respectively.

In addition to increased charge offs, the FDIC said that the volume of delinquent loans at banking institutions also increased dramatically, with the inventory of noncurrent loans registering its largest quarterly increase in six years during the fourth quarter of 2006.

Residential mortgages represented the largest increase in delinquencies according to the report, with noncurrent mortgage loans growing by $3.1 billion, or 15.6 percent, during the quarter. The amount of real estate construction and development loans that were noncurrent also increased, up $1.0 billion or 34.8 percent, while noncurrent home equity loans rose by $492 million, or 28.3 percent.

Lending growth in the mortgage industry also slowed significantly during the fourth quarter, according to the report. Residential mortgage loan originations increased by $1.1 billion, the smallest increase in residential mortgage volume in three years, while real estate construction and development loans grew by just 3.7 percent.

Issuance of mortgage-backed securities suffered as well, declining by $13.0 billion during the fourth quarter, following a $5.1 billion decline in the third quarter.

For more information, visit http://www.fdic.gov.