Tuesday, May 04, 2004

Phony mortgage default rates---The media and housing experts will trumpet how low the mortgage default rates are by historical standards. This is misleading. The refinancing boom has masked the true underlying trouble many borrowers are in. After all, when you refinance out of a loan in default, or sell a home with a mortgage in default, that defauted loan is removed from the statistics in favor of a new fresh up to date loan, and so on. This game of mortgage musical chairs will soon play itself out as climbing interest rates, slow down the mortgage origination process. When the music finally grinds to a halt, then people will actually have to keep their payments up to date with (here's a novel idea) "Their Own Money!!" Only then will we see historic high mortgage default rates.