The Organization for Economic Cooperation and Development is predicting that mortgage-related write-offs could reach $300 billion, says the New York Times. Although major U.S. financial institutions have placed their estimates at around $50 billion, the OECD says that “a rougher period may yet await financial markets.”

The O.E.C.D., based in Paris, is an international organization that helps governments with economic, social and governance issues. In particular, mortgage resets — the point at which the interest rate on a loan shifts upward to reflect current borrowing costs — have not peaked, but will probably do so next May, the organization said in the report.

“We still have not hit the worst point in resets, delinquencies and ultimate losses on mortgages,” it said.

The group estimated the losses based on a 14 percent default rate on subprime mortgages, high by historical standards but entirely plausible under the current circumstances, economists say. Losses on subprime loans — those made to the least creditworthy borrowers — would cost lenders $125 billion, the organization said.

Factoring in so-called Alt-A mortgages, ones given to people with better credit but still not high-end, the organization concluded that an overall loss level of $300 billion looked feasible.

Yikes. Happy Black Friday!

$300 Billion in Write-Offs Is Predicted [New York Times]
(Photo:stirwise)

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