Mortgage Overdues, Chargeoffs Rising at Banks

Delinquencies and chargeoffs on residential mortgages and construction and development loans accelerated during the second quarter as banks and thrifts reported an 87% drop in profits, according to the Federal Deposit Insurance Corp. Bank earnings fell to $5 billion, compared with $36.8 billion in the second quarter of 2007, after FDIC-insured institutions set aside $50.2 billion in loan loss reserves and charged off $26.4 billion in bad loans. The serious delinquency rate (90-days or more past due) on single-family loan mortgages rose to 3.1% in the second quarter from 2.1% at year-end 2007. Chargeoffs on those residential mortgages totaled $6.6 billion, up from $4.2 billion in the first quarter. Meanwhile, the serious delinquency rate on residential C&D loans rose to 8.66% in the second quarter and chargeoffs totaled $1.7 billion. FDIC officials are expecting more bank failures this year, especially among institutions with high concentrations of residential and commercial C&D loans. The number of institutions in the FDIC's problem bank list rose from 90 to 117 during the quarter.