US property slowdown could increase risk for CDOs

Decelerating house price inflation and competition among commercial mortgage lenders could hurt US structured credit products, according to a Dresdner Kleinwort report.

The bank's analysts noted losses on home equity loans had increased in the past two years, partly due to slowing US house price inflation. Such loans typically make up more than 50% of assets in US high-grade collateralised debt obligations of asset-backed securities (CDOs of ABS), and more than 60% of US mezzanine CDOs of ABS.

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