Are mortgage holders still underestimating their default losses?
Abstract:
The first phase of cleaning up the mortgage mess is now largely behind us. Most banks and other lenders have marked down the value of their mortgage related assets and have found new capital to replace their losses. Phase two is now underway. We will find out whether the expected default losses are smaller, the same as or bigger than the sum of lender write downs.
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Comments
04/26/2008 - posted by Don Arpin
When Mr. Haughey throws out a figure of $400-$800 billion, he seems to be confusing loses with defaults. When a homeowner defaults, the lender usually recovers a large portion of the loan through the sale of the home. For the $800 billion figure to be an actual loss it would require well over a trillion dollars in defaults or the total collapse of the housing market. Nothing happening now would justify either scenario.
