Credit Suisse: 8.1M Foreclosures a Possibility

Mortgage bankers will foreclose on 8.1 million homes over the next four years, representing 16% of all outstanding residential loans in the U.S., according to a new report issued by Credit Suisse. Back in April CS forecast 6.5 million foreclosures, or 13% of outstanding mortgages. The Wall Street firm says it favors a plan by Treasury to create a 4.5% mortgage using mortgage-backed security issuance but believes the agency "should target an even lower rate in foreclosure hot zones where entire neighborhoods are at risk." CS analyst/managing director Rod Dubitsky estimates that within two years 72% of consumers with a subprime loan - and 83% of payment-option ARM borrowers - will be in a negative equity position if home prices fall 15%. Mr. Dubitsky spoke at the annual housing forum sponsored by the Office of Thrift Supervision on Monday afternoon.