Nov. 22 (Bloomberg) -- Losses from U.S. subprime mortgage foreclosures, coupled with slowing economic growth and falling house prices, could reach as much as $300 billion, the OECD said.

Global stock markets have lost $2.9 trillion since Oct. 31 and the collapse of the subprime market in the U.S. has triggered about $50 billion in writedowns among the world's largest banks. The U.S. dollar could also face further downward pressure as overseas investors who previously bought structured products based on subprime loans become more unwilling to buy higher-yielding debt, the OECD said.

``Recent economic news points towards a more protracted economic adjustment,'' the Organization for Economic Cooperation and Development said in a report released yesterday in Paris. ``A recession in the U.S. is now seen as more likely than before by some observers.''

The number of economists forecasting a U.S. recession almost doubled in the past two months, according to a survey by the National Association for Business Economics.

``I don't think the U.S. will technically fall into recession, but we'll certainly have a slowdown,'' said Guy Sebban, secretary-general of the Paris-based International Chamber of Commerce.

U.S. home foreclosures doubled in the third quarter from a year earlier as subprime borrowers failed to make higher payments on adjustable-rate mortgages. The jump in foreclosures is exacerbating the U.S. housing recession by increasing the number of homes on the market as sales and prices decline.

`Risk of Default'

Foreclosures are likely to rise over the next few quarters, and the ``adjustment'' in the U.S. housing market has ``a way to go,'' Federal Reserve Bank of Minneapolis President Gary Stern said this week.

``Roughly a fifth of subprime mortgages are estimated to be at risk of default,'' the OECD said. ``The ultimate size of losses and their impact on financial institutions will not be independent of what happens to interest rates.''

Interest rates on about $750 billion of subprime loans may be reset this year, and the amount will probably climb to $890 billion in 2008, the OECD said. The report assumes a hypothetical loss rate of 14 percent, or $125 billion, on subprime mortgages after borrowing costs are reset next year.

Rates on about $400 billion of Alternative-A mortgages may be reset in 2007, the report said, before rising to $475 billion next year. Alt-A loans fall between prime loans made to the most creditworthy borrowers and subprime loans to customers with the worst repayment records or heavy debts.

More Foreclosures

``The bulk of such resets is expected to peak in the first quarter of 2008, which in turn is expected to prompt a further increase in default rates,'' the OECD said. ``Foreclosures, which have also risen sharply, could reach historical highs.''

Losses at banks and securities firms are fueling concern that rising delinquencies on home loans to people with poor credit will drag down the economy. The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion, Goldman Sachs economists said last week.

``Securitization of mortgage loans has helped to spread the risks among a wider variety of investors, albeit at a cost of greater opacity as to where the risks lie in the system,'' the OECD said. ``The crisis is likely to be drawn-out and bumpy.''

Stock Declines

Slower economic growth may also lead to ``periodic volatility'' in equity markets, according to the report.

``Thus far, equity investors seem to have shrugged off the negative sentiment that prevailed over the summer, but it may be too soon to draw firm conclusions,'' the OECD report said. ``It may well be that the recent correction is only a precursor of a more protracted downturn.''

The U.S. dollar has fallen against 14 of the 16 most- actively traded currencies this year.

The dollar's decline ``has tightened monetary conditions elsewhere and made international policy co-ordination more difficult,'' the OECD said. ``The macroeconomic environment is becoming more difficult for monetary policy. Rising oil and commodity prices are creeping into inflation expectations.''

To contact the reporters on this story: Shamim Adam in Singapore at

Last Updated: November 22, 2007 07:14 EST