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KAI RYSSDAL: The British banking giant HSBC has announced its facing bad-debt charges of more than $10 billion. That’s about 20 percent higher than what analysts were expecting. It’s never nice to surprise analysts like that. HSBC said it’s been left holding the bag because mortgage holders in the U.S. aren’t making their payments. Marketplace’s Alisa Roth reports from New York HSBC’s not the only one in trouble.

ALISA ROTH: Back when interest rates were low and the housing market was hot, all kinds of people bought homes. Banks and other lenders offered mortgages even to people with very little income. Or lousy credit. Now the lenders are having a hard time because borrowers aren’t paying them back.

KAREN SHAW PETROU: This is basic banking.

Karen Shaw Petrou heads the research firm Federal Financial Analytics. She says this about the banks:

PETROU: People got so caught up in elaborate models and highly quantitative analytics that they forgot very simple things like ability to repay.

She says creative financing worked fine for a while. If the payments got to be too much, homeowners could always sell the house and pay back the lender. As home prices fall, though, it can be hard to get all that money out of a property.

The result has been more defaults on mortgages and more foreclosures on houses.

James Ballantine is with the American Bankers Association. He says one answer is more monitoring. Banks need to keep track of their customers better, making sure they’re keeping up with payments. But also of their own businesses. Things like . . .

JAMES BALLANTINE: The possibility, whenever you make a loan that is subprime, you have to make sure that you have adequate assets in house to cover any defaults.

Ballantine says there’s likely to be more shaking out of the mortgage business, especially in the subprime market.

In New York, I’m Alisa Roth for Marketplace.