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This is a prediction of the likelihood of a customer defaulting over the next 12 months.
The proposal warns that up to $739 billion in mortgages are at "moderate to high risk" of defaulting over the next five years and that millions of families could lose their homes.
In a study last month, Deutsche Bank calculated that United States junk bond index yields, then running 16 percentage points higher than Treasury bond yields, theoretically compensated investors for more than half of issuers defaulting over five years — even assuming creditors don't recover anything at all.
According to the latest DOE data on defaults, more than 1,200 of the 6,129 Full Sail graduates who started paying back their federal loan in 2011 ended up defaulting over the next three years, at a rate of 20percentt.
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Moody's Economy.com recently estimated that three million subprime borrowers were likely to default over the next several years.
Standard & Poor's estimated last month that $35 billion in corporate debt may default over the next 15 months, when only $4.5 billion has done so as of September.
The number of bonds in the "junk" category — too low to be considered investment grade — rose to 46 from just 9, and the agency said it anticipated that 10 of those issues could default over the next decade.
Junk bonds were trading as if almost 9 percent of issues will default over the coming year, Mr. Morgan observed, even as Moody's Investors Service projects that only 1 percent to 2 percent will do so.
That is, roughly half of corporate issuers would have to default over the next ten years for a broad portfolio of corporates to underperform Treasurys.
In comparison, creditors can earn 14.5% annually on five-year Lending Club notes, of which 4.9% have defaulted over the past three years.
Roughly half of a portfolio of such credits would have to default over a ten-year period to break even with returns on ten-year Treasurys (assuming 30% recovery).
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com