FDIC Hoping Worst Is Over for Single-Family Loans

Federal Deposit Insurance Corp. officials are hoping the worst may be over for single-family mortgages but they fully expect the performance of commercial real estate loans will continue to deteriorate. The agency reported that 6.8% of single-family loans held by banks and thrifts are 90 days or more past due or considered uncollectible, a rise of 220 basis points over the past six months. FDIC-insured institutions charged-off $8.6 billion in single-family loans in the second quarter, a 15% increase from the first quarter. However, only $15.4 billion of single-family loans became "noncurrent" (as FDIC calls seriously delinquent) during the second quarter, compared to $27.3 billion in the first quarter. FDIC officials are looking for this decline to become a trend. The noncurrent rate on CRE loans hit 2.88% in second quarter, up from 2.25% in the previous quarter, and $7.1 billion in CRE loans became noncurrent during the quarter. The FDIC expects further deterioration for several more quarters.