MarketWise Commentary
Week Ending September 7, 2007
"We are talking about 93.4 percent of all people who have a mortgage are paying on time. So while the headlines have been rightly focused on subprime adjustables, the larger picture has generally been missed."
MBA Chief Economist Doug Duncan.
So is the MBA Chief Economist correct? Partially. This week the carnage of the subprime lenders remaining continues to unravel. Option One’s deal with Cerberus is rumored to be running into difficulties. Radian and MGIC finally called off their merger. The much feared Second Quarter, 2007 National Delinquency data from the Mortgage Bankers Association was not a bombshell indicating that there is a clear problem in the subprime ARM sector but overall foreclosure and default activity remains at historically reasonable levels. So for the moment the MBA’s Chief Economist is correct, however, the fact remains that unfortunately the US mortgage industry is likely to see more difficult times ahead before the situation finds its natural equilibrium.
The Fed is trying to contain the problems and Bush started to rollout plans to bailout mortgagors which just may work. The industry is in a period of clear contraction with the basic infrastructure “right-sizing” itself.
MarketWise Advisors, LLC
Sept 7th, 2007
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