S & P believes housing crisis not over yet

Standard and Poor’s says losses from the housing turmoil will probably peak in 2009, with total defaults reaching $150 billion, although the global economic growth is expected to remain strong for the next two years. The U.S. economy will probably grow at a lower pace due to higher unemployment. S & P’s chief economist David Wyss also mentioned that he expects another rate cut before the end of this year and that the stock market is strong, so financial markets are probably “heading for expansion”.

This estimate, however, may be somewhat optimistic, given the uncertainty reining in financial markets right now and the strongly “bearish” forecasts of some economists. Losses at mortgage lenders are still all over the news, so the mortgage industry is not likely to rebound in the coming months. Jumbo Loan lender Thornburg Mortgage announced yesterday that third-quarter losses on loan sales would be greater than expected, which resulted in an 11% drop in its stock price. Thornburg had expected a loss of $863 million, compared to the actual number it will probably report - $1.1 billion. The estimated loss of the lender’s mortgage securities portfolio was also revised upwards, to $268 million from $262 million. The company believes that it will be able to continue to fund new loans “provided market conditions do not deteriorate further”.