Residential lending Risks associated with residential mortgage and home equity lending remain a top supervisory priority due to the continued negative trends in home prices, elevated levels of delinquencies and foreclosures, and slack demand for residential mortgage securities in the secondary markets. Banks continue to experience losses on residential first mortgage loans, especially, but not exclusively, on nonprime lending.
Losses on home equity loans are also increasing significantly, even for lenders not heavily involved in subprime lending, and loss severities as a percentage of outstanding exposure on this product are greater than for first lien loans.