"What (CBS News' 60 Minutes) did acknowledge is that the next round of mortgage defaults is coming from two classes of mortgage lending that are slightly (but barely) more financially responsible than sub-primes. There were nearly $1 trillion in sub-prime mortages, but these new (to most Americans) forms of mortgages, the Alt-A and Option ARM mortgages, total roughly another $1.5 trillion. Given the fact that the banking industry has already sustained some devastating shocks, there is increasing doubt about the continued viability of many of the largest banks still left standing. Worse, it's going to take another 3-4 years for these loans to default, because that's how long it's going to take for the interest rates on these loans to reset to higher levels. Given the fact that a large segment of these loans are already defaulting even before the interest resets take place, the expert interviewed on the program claimed that he expects roughly 70% of these loans to default based on current, pre-reset default rates!"
I saw the segment and based on the facts presented, it seems inevitable that the housing-related implosion is just heading to Part II. What solution or solutions can stop this need to be implemented in the coming months.
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