The housing slump is hammering the nation’s banks, as poorly performing mortgages and builder loans push a growing number of financial institutions to the brink.

More than 6 percent of real estate construction and development loans were at least 90 days past due as of 2008’s second quarter, according to data released last week by the Federal Deposit Insurance Corp.

“While troubled loans are increasing across all types of loans, residential mortgage loans account for the largest share of the increase, and construction loans are the fastest-growing category,” Federal Deposit Insurance Corp. Chairman Sheila Bair said.

This is causing serious problems for financial institutions of all sizes, many of which have significant exposure to real estate. FDIC-insured commercial banks currently hold $3.6 trillion overall in real estate loans, and $559 billion specifically in construction and development loans, and the weakness in these segments is directly responsible for the growing number of banks considered troubled by the FDIC. The agency now lists 117 banks as “problem institutions,” up from 90 last quarter.

“We continue to see stress in commercial real estate, especially construction and development exposure, with the majority of new problem institutions having concentrations in those areas,” said John Corston, an associate director, large institutions and analysis branch, at the FDIC.

The increasing percentage of non-performing construction loans (6.1 percent in Q2 versus 4.7 percent in Q1) troubles Ivy Zelman, the analyst behind Zelman and Associates. “When the summer selling season comes to a close and banks run out of mitigation tactics to keep upside-down properties ‘performing,’ we expect [non-performing loans] to stretch into the double-digit range, eventually translating to erosion of capital,” she predicts in a written report.

Zelman isn’t the only one bracing for more difficult times ahead. Even the FDIC chairman expects banks to struggle in the months to come. “More banks will come on the [problem] list as credit problems worsen and the assets of problem institutions will continue to rise … Still, most institutions remain fundamentally sound. Ninety-eight percent remain well-capitalized, and that accounts for 99 percent of total bank assets,” Bair said.

Alison Rice is senior editor, online, at BUILDER magazine.