How much will lenders lose from the US mortgage mess? The total could reach as high as $1 trillion (Rs39.3 trillion). In July, Fed chairman Ben Bernanke was talking about $50-100 billion. But Bernanke has been overtaken by events—some frightening numbers on late payments and a bruising batch of write-downs by banks.

So the pessimistic whisper numbers are around $300 billion, reaching up to $500 billion. But even those could prove low. Start with the $1.5 trillion of subprime mortgage debt outstanding. The market’s view on the value of these loans is expressed in various series of the ABX index of credit-default swaps. All but the AAA series are selling below 50% of par.

Combining the index values with the fast pace of ratings downgrades in mortgage-backed securities, a 50% write-down on the whole asset class—$750 billion losses—looks plausible. These loans were priced on the basis of much lower default rates and much higher resale value for the houses than looks likely. US house price has fallen by 5%, according to the S&P Case-Shiller index, and with inventories high, further declines are almost certain.

Then there are the $1.5 trillion of mortgages, which start with no or negative amortization of principal, but kick in with a high interest rate after two or three years. A 10% haircut on the asset class sounds reasonable, another $150 billion.

Finally, there are mortgages that looked good when they were written. It wouldn’t take much of a rise in the unemployment rate for many borrowers to feel the pinch. With house prices down, some lenders will be caught out. A plausible guess of the losses: $100bn.

All together, it comes to $1 trillion, spread over the next five years. As a post-bubble loss, it’s fairly modest. But as a problem for the financial system, it could prove large indeed.