According to Randall Bauer, a fixed-income portfolio manager at Federated Investors, the total U.S. mortgage-market value is estimated at $9.5 trillion to $10.5 trillion, with about 15% of the total represented by subprime assets.
While the problems for subprime borrowers and lenders appear clear, the impact on mortgage bondholders depends on a variety of factors. Some mortgage bonds, such as those issued by the Government National Mortgage Assn. (Ginnie Mae or GNMA), are guaranteed by the federal government and bear no credit risk.
Statistics do not take into account the second mortgage market like loans from HSBC Finance subsidiaries HFC and Beneficial Finance. Their subordinated position in the mortgage market make such loans very risky for the leander. When combined with sub-prime first mortgages, high exposure to a combination of both presents the highest risk to shareholders and investors.