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Fitch Ratings: U.S. banking weighed down by real estate exposure

The U.S. banking sector is still drowning in losses stemming from exposure to residential real estate, Fitch Ratings said Monday.

Fitch said the top 20 banks could face aggregate losses above $80 billion on home equity and on one-to-four family portfolios.

The ratings giant expects a loss rate of 5.1% on aggregate loans valued at $1.6 trillion.

Fitch added that losses will remain above historic levels for the next several years.

"Each bank's ratings have a cushion above the base case losses outlined in today's report," the ratings giant wrote. "However, if losses in a bank's home equity and/or one-to-four family portfolios start to approach Fitch's stress scenario, its ratings would likely come under negative pressure."

Exposure to home equity loans remains a top concern, with Fitch noting that some of these loans are saturating the balance sheets of some of the largest banks. Many of these loans are subordinated and remain at risk of home price declines and principal write-downs, making it possible future losses could hit the banks hard.

kpanchuk@housingwire.com

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