Toll May Hit $341 Billion

JPMorgan Chase, in a new report, estimates that depositories and investment bankers could be on the hook for $341 billion in mortgage-related writedowns - both residential and commercial - in the years ahead.

The report, which has not been issued publicly, notes that 75% of these writedowns will be borne by federally insured banks.

As might be expected, the largest writedowns will come in subprime residential ($150 billion), followed by commercial mortgages ($56 billion) and consumer credit ($48 billion).

JPM chief of commercial MBS research, Alan L. Todd, author of the study, declined to discuss his findings. Mr. Todd noted that the bank/investment banking firm held a teleconference last Tuesday to discuss the report and that most of his comments were "off the record."

National Mortgage News was not a party to the press conference. A copy of the report was given to this newspaper by an industry source.

In the report, Mr. Todd fears that bank writedowns on collateralized debt obligations will constrain credit availability "over the foreseeable future."

Also in the report, JPM focuses on the commercial market, noting that "trophy properties" in some cities could decline by 15% at least. He argues that the current state of the commercial RE market is not solely a liquidity issue. "Loan defaults have become tangible, investors discounting future expected losses," he writes. "CMBS spreads will remain volatile," noting that a "lack of clarity from the rating agencies has exacerbated risk aversion."

ARMs Generate Bulk of Delinquencies

% Loans % Foreclosure

Loan Type Outstanding Starts

Prime Fixed 65% 18%

Prime ARM 15% 20%

Subprime Fixed 6% 12%

Subprime ARM 7% 42%

FHA 7% 8%

Source: MBA. Data for 4th Quarter 2007. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/