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How Mortgage Troubles Impact U.S. Banks -- Part Two

This time, we focus on the long-term effects--and one 5-star pick.

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In part one of our article, we discussed the short-term problems some of the larger banks would face from the subprime mortgage blowup, and how it affected the secondary mortgage market. As we have seen in the past week of earnings announcements, several banks, including  SunTrust (STI) and  Capital One (COF), had to write down the values of the mortgages they are preparing to sell, and  Wachovia (WB)  and  M&T Bank (MTB) chose to hold more mortgages on their balance sheets.

Now let's turn our attention to the long-term effects. With the jump in delinquencies and foreclosures in the mortgage market that helped contribute to the subprime and Alt-A mortgage business woes, we have to ask--did the credit standards become too lax?

Jaime Peters does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.