1,460,000 ARM defaults expected

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Submitted by powayseller on September 25, 2006 - 2:48pm

"According to Christopher Cagan, an analyst with First American Real Estate Solutions, a housing consultancy in Santa Ana, Calif., about 19 percent of the 7.7 million ARM’s taken out in 2004 and 2005 are at risk of defaulting."

NYT, 9/26/06

Submitted by North County Jim on September 25, 2006 - 3:10pm.


Why are you assuming that every at-risk loan will default? That seems to be quite a stretch, no?

Submitted by Sparkey on September 25, 2006 - 3:15pm.

Here is the article. 

Real Estate Desk; SECT11
It Seemed Like A Good Bet At The Time
2000 words
24 September 2006
The New York Times
Late Edition - Final1
Copyright 2006 The New York Times Company. All Rights Reserved.


An article today on the cover of Real Estate on adjustable-rate mortgages refers imprecisely in some copies to the current average interest rate for fixed-rate mortgages. It is 6.36 percent for 30-year fixed-rate loans, not for all fixed-rate loans.


FOR Inga Rogers, the party ends in 38 days.

On Nov. 1, the adjustable-rate mortgage, or ARM, she took out three years ago at the spectacular rate of 3.875 percent will get considerably more expensive. Ms. Rogers, a single mother of two living in a three-bedroom ranch in suburban Boston, faces a rate increase of three percentage points, raising her monthly house payment by $300, to $1,419, and putting her at a financial crossroads.

Her choices: keep the loan and run the risk of future increases, or ditch her adjustable mortgage in favor of a more stable loan with a higher monthly payment.

Ms. Rogers, a hairstylist working 32 hours a week, will have to work more in either case. The 6.85 percent 30-year fixed-rate loan she is considering would cost $100 a month more than her higher ARM payment, but it would at least protect her from future increases that could go far higher.

''I still might not be able to make the extra money, because with my job I don't have a set income,'' she said. ''So I have an adjustable salary, too. My whole life is a roller coaster.''

As housing prices shot up in recent years, ARM's gave borrowers a way to jump into the market while paying only a fraction of the interest that traditional mortgages require, at least for the first few years. But the risk they took -- that rates would not rise too steeply when the loans entered their adjustable period -- now haunts millions of borrowers, who have seen their monthly payments skyrocket. Now, if they can afford it, they are moving to 30-year fixed loans or ARM's that remain at the same rate for at least seven years.

ARM's have come in and out of vogue, but their latest surge began about five years ago, when the Federal Reserve Board started cutting key short-term interest rates in an effort to stimulate the economy. But now that the Fed's focus is on reining in inflation, rates have risen steadily.

The increases have caught many homeowners in a ''can't pay, can't sell, can't refinance'' vise, in which their ARM payments are outpacing their incomes and their homes have not appreciated enough to help cover the cost of a refinanced mortgage or to allow them to sell and walk away. For them, foreclosure looms.

But for most ARM borrowers whose house values rose sharply in recent years, there is ample fiscal room to switch to a loan with higher interest but lower angst. ''Instead of facing significant payment shock, a lot of people are looking to refinance because they're fearful of further increases,'' said Craig Focardi, an analyst with TowerGroup, a financial-services consultancy in Needham, Mass.

Some borrowers are simply taking out new ARM's, which carry a fixed rate for three years or less. ''But some of them are thinking, 'Do I really want to double-down?' '' Mr. Focardi said.

He said a borrower who took out a three-year ARM in August 2003 could expect initial interest rates of about 4.6 percent. On a $300,000 loan, the monthly payment was $1,610. That rate would rise this year to about 6.6 percent, leaving the borrower with a $327-a-month increase, plus the possibility of future annual increases (or decreases) of as much as two percentage points.

Nearly 37 percent of all loans taken out in a single week in late March 2005 were ARM's, roughly 10 percentage points higher than the same period a year earlier and 23 percentage points higher than the same period in 2003, the Mortgage Bankers Association says. The loans were most heavily concentrated on the East and West Coasts, economists said, where housing prices spiked more sharply.

There is no consensus on how many of those loans are nearing the so-called reset point, when rates are adjusted. Some economists estimate that next year anywhere from $162 billion to $1 trillion worth of adjustable-rate mortgages will be reset. Douglas Duncan, the chief economist of the mortgage bankers' group, said: ''The truth is probably somewhere in the middle of those estimates, but whatever the number, we've seen that consumers are already acting.''

And what they're doing is getting out of those ARM's. Refinancing activity is back up to nearly 44 percent of all loans, after slumping to about 33 percent in May, the lowest point since June 2004, according to the mortgage bankers' group. As of early September, slightly more than 25 percent of all loans were adjustable, the lowest level since October 2003. The rest are fixed-rate mortgages; the interest rate for 30-year fixed-rate loans now averages 6.36 percent.

According to lenders and mortgage brokers, borrowers who are staying with ARM's are divided into three groups: those for whom the possibility of higher interest rates is not a concern; those who know they will not be staying in their homes for long; and those who simply cannot afford higher monthly payments -- people who are essentially at the mercy of the market.

In San Francisco, Marc Geshekter, a broker with Residential Pacific Mortgage, said of his ARM customers: ''A lot of them are just taking out a new five-year ARM at 6 or 6.25 percent rather than taking a chance on the current loan adjusting upward. Maybe they had a three-year ARM before, so they're opting for a slightly longer-term loan because they're wishing they had a few extra years now.''

As in other pricey real estate markets, ARM's are popular in New York. Steven Schnall, the president of the New York Mortgage Company, said ARM's represented 57 percent of its loans in New York, compared with 48 percent nationally.

New York, he said, has a higher percentage of affluent homeowners who are more mobile and therefore less likely to need a long-term mortgage. ''And they're more able to afford the risks associated with ARM's,'' he said.

Affluent they may be, but many New York borrowers are unwilling to accept sharp mortgage increases. Michael D. Cohen, a partner in Phillips Nizer, a New York law firm, will soon refinance the ARM on his five-bedroom apartment on Park Avenue. The new ARM has a 7 percent rate cap for 10 years. ''I've been receiving the benefits of low rates for years,'' he said. ''But you have to take the bad with the good.''

Others are more desperate. Stephen Parnell, the chief executive of the Lynxbanc Mortgage Corporation in Boca Raton, Fla., said some of his clients had taken out so-called ''option ARM's,'' wherein they can choose to pay less than the nominal interest rate on the loan, so the debt actually grows until it reaches a limit. After that, or after a certain period of time, the interest rate is locked in, often at a steeply higher level.

''Some people are taking that short-relief pain pill in a last-ditch effort to stay in the house,'' Mr. Parnell said. ''Their hope is that the real estate market in the next two to three years will be kinder to them.''

Some others are in more desperate situations. Mr. Parnell used an example of buyers who had used ARM's to buy homes in new developments last year, only to be facing payments they cannot afford. They would sell their houses to rid themselves of the loan, but the builders in those developments are selling off the last of their new homes for much less than what buyers paid last year, leaving the buyers with ARM's little choice but to drop their resale prices sharply to compete.

One such owner, who requested anonymity rather than risk the embarrassment of exposing a financial blunder, bought a house in Port St. Lucie, Fla., as an investment in April of last year and financed the $410,000 purchase with an ARM, with an introductory rate of nearly 7 percent. The loan was an afterthought, since he expected to sell the house almost immediately for a profit. He didn't, and now the developer recently sold a similar house in the neighborhood for $325,000.

''I just didn't know what I was doing, and I shouldn't have done it,'' said the man, who does not have enough equity in the house to refinance and who will run out of money to pay the mortgage in 10 months. ''Maybe the Lord will send a miracle.''

The more precariously positioned ARM borrowers are very much on the minds of economists, some of whom fear that masses of consumers will not be able to afford the new higher payments, setting off a recession. According to Christopher Cagan, an analyst with First American Real Estate Solutions, a housing consultancy in Santa Ana, Calif., about 19 percent of the 7.7 million ARM's taken out in 2004 and 2005 are at risk of defaulting.

But many more will escape these loans unscathed, Mr. Cagan said. Melinda Johnson, a dietitian who lives in the Phoenix suburb of Chandler with her husband and two children, recently refinanced to a 30-year fixed loan, six months after the rate on her ARM jumped to 5.85 percent from 3.85 percent.

''That was fun,'' Ms. Johnson said, referring to the initial interest rate, which ran for three years. ''But if the market climbed and we still had the loan, we could be at 9.85 percent in another two years.''

Ms. Johnson and her husband plan to own their home for the long term, so a 30-year fixed loan makes more sense, she said. But the $4,500 the couple spent on the refinancing probably erased most of the interest-rate savings from the ARM, she said.

''I'd do it again in the right circumstances,'' Ms. Johnson said. ''If rates are low and it's looking like the start of a great market, we might take that gamble.''

Ms. Rogers, of Stoughton, Mass., outside Boston, said she would give herself a little more time before deciding whether she could stomach the uncertainty of her mortgage. Others, like Richard and Sandra Strauss of Oakton, Va., are done with the drama.

About five years ago, the couple, who have lived in the same house for 22 years, took out an adjustable-rate mortgage with an introductory rate of 1.95 percent. Since then, the rate has climbed 13 times, to about 7.5 percent in August. They could have saved money simply getting a new adjustable-rate loan, but instead they opted for a 30-year fixed loan, cutting about one percentage point off the interest rate and saving hundreds on their previous monthly payment.

''We don't want to track rates regularly,'' Ms. Strauss said. ''And the rates on fixed mortgages are fairly decent.''

Mr. Strauss put it more bluntly. ''We're done with ARM's,'' he said. ''We don't want any more surprises.''

Photos: ONCE BITTEN, TWICE SHY -- Richard and Sandra Strauss, above, shown with their daughter Stephanie at their house in Oakton, Va., opted for a fixed-rate loan instead of another adjustable-rate mortgage. Inga Rogers, left, of Stoughton, Mass., is wrestling with that same decision. (Photo by Steve Ruark for The New York Times); (Photo by Robert Spencer for The New York Times)(pg. 10)

Drawing (Illustration by Ross MacDonald)(pg. 1)

Document NYTF000020060924e29o0006d

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Submitted by powayseller on September 25, 2006 - 7:46pm.

NCJ, what? I didn't make any forecast, so why are you asking ME? Ask Cagan!

Submitted by North County Jim on September 25, 2006 - 7:50pm.

PS, what title did you give this thread?

Maybe I'm reading too much into this but I think there is a huge difference between saying x amount of mortgages are at risk and x amount of defaults are expected.

Submitted by Daniel on September 25, 2006 - 8:05pm.


I think we all know that that sort of nuance escapes PS. Words like might/may/will seem to have the same meaning to her. But it's part of her charm, wouldn't you say? It took me awhile, but I got used to it.

Submitted by North County Jim on September 25, 2006 - 8:19pm.

Thanks Daniel. My bad.

Submitted by woodrow on September 25, 2006 - 8:32pm.

I agree with NCJim - the title is very misleading and shows how extremely biased PS is in her analysis. I enjoy PS and her posts, but her credibility is questionable at best - she's become such a cheerleader for the crash that she's spinning the news to make things appear even worse than they really are.

Stick to accurately reporting and interpreting the facts PS - you're great when you're not spinning!

Submitted by powayseller on September 25, 2006 - 8:52pm.

Cagan did not say "chance of default", but "risk of default". He EXPECTS them to default. I did not say "1 mil loans WILL default", but that Cagan expects it.

That is exactly what I meant: the expectations for defaults are rising. No longer are we hearing that everything is okay. The analysts are waking up to the risks in these loans.

To the trio: please put personal comments in the off-topic forum.

Submitted by PerryChase on September 25, 2006 - 8:50pm.

Why can't we have a little crash spinning when we have mountains of bubble spinning. Read the info and believe what you will.

Why should the crash advocates be any more balanced than the bubble advocates?

I expect some major bankruptcies coming. No one in 1989 would have predicted that nearly the entire S&L industry would disappear within a decade, but it did.

Submitted by woodrow on September 25, 2006 - 9:02pm.

PS - You're using the wrong terminology. "Risk" does not mean "expected". Not even close. You are not comprehending the idea the author is trying to get across, and it's quite amusing.

Submitted by North County Jim on September 25, 2006 - 9:08pm.

Cagan did not say "chance of default", but "risk of default". He EXPECTS them to default. I did not say "1 mil loans WILL default", but that Cagan expects it.

I've read the NYT piece and reread it and nowhere do I get the impression that Cagan expects all of the at-risk loans to default. How do you arrive at that conclusion?

Perhaps the nuance escapes me but please explain the difference between "chance of default" and "risk of default".

Submitted by woodrow on September 25, 2006 - 9:08pm.

Perry - I thought we were here to discuss what's REALLY going on in the market, to get away from the spinmiesters? If we're going to do the same thing but on the opposite side, how are we any different? I'll call out spin where ever I see it, from the RE bulls or the RE bears.

Full disclosure - I too am a bear renting until I believe the market has stabilized. I just prefer to stick to facts, figures, and analysis while avoiding putting words into the mouths of authors. The author in that Times article does not "expect" all of those loans to default, he only stated that they are "at risk". PS's spin is misleading, and evidence of her myopia.

Submitted by waiting hawk on September 25, 2006 - 9:18pm.

I'm just hoping for them all too actually pay the increased resets and cut consumer spending so we have a recession and the 30 year fixed get thrown out. Sick ey?

My website tracking Temecula and South Riverside County

Submitted by powayseller on September 25, 2006 - 10:46pm.

"evidence of myopia", "misleading spin", very colorful language. But what does that accomplish? Isn't it better to present your forecast, your interpretation? Maybe not as entertaining, but certainly more constructive.

woodrow,daniel,NCJ, how many threads have you started, vs. how many do you like to tear apart? It is in giving that we receive, it is in creating that we accomplish. This is an invitation for all 3 of you to create your own analysis.

Submitted by greekfire on September 25, 2006 - 10:56pm.

I can understand the discrepancy between the words "expected" and "at risk", but come on. It sounds like your arguments are based soley on semantics. Why not point out a few type-o's while you're at it?

I have read the article in question and it is quite obvious, even to the most casual observer, that it's tone is one of caution and regret for making the risky decision of buying a home with an ARM. It's that simple. I could include actual phrases from the article to backup my claim, but don't take my word for it - read it yourself...for a 3rd time if you have to.

Submitted by North County Jim on September 26, 2006 - 10:43am.


My argument is certainly based on semantics. As you said, there's a difference (huge IMO) between "at risk" and "expected".

Powayseller's thread title was extremely misleading and I see nothing wrong with pointing that out.

I read the same tone in the article you do. Do you see the same tone in the title of the thread?

Submitted by avidsaver on September 26, 2006 - 11:01am.

Wow... what's with all of the personal attacks on PS? I get the difference between "at risk" and "expected," but who cares? Now that you three have pointed it out, can we move on to some interesting and differing points?

I'm a total novice to this site, and sometimes the analysis is a bit much for me, but I appreciate the banter, and I learn a great deal.

But "misleading" is such a harsh word. Maybe it was a bad choice of words, maybe just an indication of PS's "spin" on the situation... WHATever.

I would like to see some differing opinions that can help me grow in understanding. The personal attacks don't do that.

Submitted by powayseller on September 27, 2006 - 7:24am.

"The more precariously positioned ARM borrowers are very much on the minds of economists, some of whom fear that masses of consumers will not be able to afford the new higher payments, setting off a recession. According to Christopher Cagan, an analyst with First American Real Estate Solutions, a housing consultancy in Santa Ana, Calif., about 19 percent of the 7.7 million ARM's taken out in 2004 and 2005 are at risk of defaulting."

Cagan's statement is in support of the argument for recession risk in the first sentence. The reason I did not change my mind about what Cagan meant, is because I still think he meant to say 1.5 million ARMs will default, leading to recession. How else can we have "masses of consumers not able to afford the new higher payments, setting off a recession"?

These types of articles are getting more common. Warnings about Option ARMs, and the risk of foreclosure are popping up all over the media. Interestingly, Cagan seems to be one of the only sources of information on how widespread they are. One of the Senate hearing panel members (non-traditional mortgages) quoted him, when asked about exotic loans. None of the panel members quoted a government or banking report. We just don't have sufficient information on these loans, since most are made in the private market.

Submitted by kicksavedave on September 27, 2006 - 9:45am.

I have a question for the experts here.

It seems obvious that a mid to lower income family, on a very tight budget, who got an ARM at the height of the frenzy and is barely able to make their $1100 mtg payment, would be in serious risk of default if the payment went up to $1500 or $1600. The family making $45K, with 3 kids, and limited potential for increasing their income - sure, they seem to be at risk when their ARM resets. They don't have $500 in disposable income, entertainment budget, or other areas where they can simply cut back on and make up that new difference. There may not be any less affordable housing in their area. They have very few options.

But here in SoCal, especially in San Diego, the typical ARM, the typical new homeowner, seems more likely to be the ones making $70K to $100K, who's payment is more like $2700... when their payment jumps to $3300 or $3500, it doesn't strike me all that realistic that they will default based on that difference. They will either suck up the difference out of their discretionairy budget, trade in the Lexus SUV lease for a Toyota, or move down from that 4BR in Carmel Valley to a 3 BR in Escondido. They have plenty of options.

Basically, that whole ARM default tidal wave that we may or may not be facing, appears to me to be centralized in lower income, lower housing price areas... in other words, not here in SD county.... (maybe in Florida, Kansas, Pennsylvania, etc) I find it hard to believe that a whole lot of folks in their $750K new constructions in areas like SD central, coastal and inland and North County, will just have to walk away from them. Will people who make ~$12K a month default en masse because their ARM went from $2.5K to $3.5K or even $4K, ? I can't see it.

Tell me why I am wrong?

Submitted by The-Shoveler on September 27, 2006 - 9:58am.


What about the people in their $750K new constructions in areas like SD central, coastal and inland and North County.
That only make 45K with 3 kids and have been sucking money via MEW to live on, and the Real-estate agents mortgage broker etc.. who were make 100K+, now less than 50K all of a sudden.

Submitted by JES on September 27, 2006 - 10:01am.

If you add job lossses and a recession everyone will be impacted. I agree with you that there are a large number of people who will be hit hard, but will have a relief valve in the form of putting the wife to work, lowering expenses, or moving down. Even for these folks this will create an urgency to get out of their current prediciment and could result in more inventory and lower prices.

Submitted by sdcellar on September 27, 2006 - 10:03am.

Main Entry: risk
Pronunciation: 'risk
Function: noun
Etymology: French risque, from Italian risco
1 : possibility of loss or injury : PERIL
2 : someone or something that creates or suggests a hazard
3 a : the chance of loss or the perils to the subject matter of an insurance contract; also : the degree of probability of such loss b : a person or thing that is a specified hazard to an insurer "a poor risk for insurance" c : an insurance hazard from a specified cause or source "war risk"
4 : the chance that an investment (as a stock or commodity) will lose value

Possibility, chance, degree of probability. Nowhere does it say certainty.

Submitted by lamoneyguy on September 27, 2006 - 11:12am.

I'm not a frequent contributor, but I'm going to throw in my two cents on the semantics debate here. And yes, it is semantics, as most or all here are in agreement that this does not bode well for the housing market or the housing bulls. But semantics are important. Maybe when Lereah says that he thinks that the housing market has bottomed out, he means that sales volume has bottomed, and will rise in a declining price environment. I doubt it, but it's possible.

"At risk" and "expected" are quite different. "At risk" is a term frequently used to describe Jr. High or High School aged children who are acting out and have had disciplinary issues. If my child were described as "at risk" and another parent, upon hearing that said, "we expect him to wind up in Juvie..." we would have big issues. If I lend a person money, I do so with the expectation that they will pay me back. However, there is the risk that I will get stiffed.

To be fair, sdcellar, PS didn't say that 1.46mil will certainly default. She said that they are expected to. The truth, it would appear, lies somewhere in the middle.

Even as many homeowners will escape default, it does not mean that they are in the clear. At best, it will pinch their budget, and we will see a decline in consumer spending, mostly affecting retail and construction.


Submitted by powayseller on September 27, 2006 - 1:06pm.

I would like nothing more than to get my hands on accurate default rates on Option ARMs. Cagan's admission that these loans are at risk is a huge admission. He's the one who published a paper showing that most homeowners have plenty of equity and ride out any housing downturn. I found his change in sentiment significant.

The per capita income in San Diego is nowhere near $70K - $100K. I think less than 20% of families in San Diego make in that income range. So the income premise does not hold.

Most important is this: lenders qualify borrowers at 40% - 55% DTI, based on today's teaser rate. It doesn't matter how much money you earn, if you are already maxed out on your mortgage payment and it goes up 50% - 100%, you're at risk of default. In my opinion, most of the people whose mortgage adjusts up by at least 50% will end up in foreclosure. My reasoning is that they are already maxed out on their mortgage payments.

IF the lenders used traditional underwriting guidelines, and they qualified the borrower on 33% DTI, then your mortgage is max. 28% of your gross income and your total debt payments are a max of 33% of gross income. So the general formula is that you could borrow 3 - 3.5x your salary for a mortgage. If the lenders used the traditional guidelines, they would make sure the maximum interest rate under the loan AFTER the teaser period ends, falls within the 33% guideline.

But that is not happening. This revelation was a surprise to us on this forum when we mutually discovered it earlier this year. We were astonished, "What, the borrower is qualified based on the teaser rate only? Then how does the lender expect the borrower to make the mortgage payment when it jumps 50% or even doubles?" Answer: the lender doesn't give a damn, 'cuz he sold the loan to the MBS investor.

So the money is lent w/ a double whammy of risk: at the teaser rate and at up to 55% of income. So the borrower is already at a high debt load in the initial teaser period. He's basically screwed if he can't refinance when the teaser period ends.

It's the lax lending guidelines that are to blame for the wave of defaults we will see.

Remember Casy Serin who got $2.2 mil in loans? This kid barely had a job.

To understand why I am so bearish on housing, you've got to understand the lending environment, and how loose it is. Low FICO, one day out of bankruptcy, no problem. Brokers are lying about borrower income, stated income, 0% down, qualifying borrowers on the teaser rate only without regard to whether the borrower can afford the payment after the loan resets....

The lenders have abandoned prudent lending guidelines. It's all about getting the commission today, and no longer about making sure the loan actually gets repaid. The lender could care less if the damn loan gets repaid. They have the profits today!

Get this: the subprime hybrid ARM has very low payments for 2 years, and then jumps in year 3, with a payment shock of 40% - 50%. Even if the interest rate goes down by 200 basis points, the payment shock is 25%!!!! (Center for Responsible Lending). The panel member at the Senate Hearing said there are 3 main problems with the subprime loans:
1) high debt ratio (50% - 55% of gross income for principal and interest).

2) underwriting to initial payment, so the borrower is qualified based on his ability to pay the temporary low intro rate. When the payment goes up, the FINAL PAYMENTS EXCEED HIS GROSS INCOME!!!!!!

3) borrower's ability to pay is on principal and interest only. They don't even include the taxes, insurance, HOA! If you include all that, you could be over 55% - 60% of gross income. That is on the initial teaser rate only.

This degradation of lending is criminal. We've got lenders who are selling products for the sake of commission, without a care whether people can stay in their homes.

So don't waste your time getting mad at me. Get mad at the lenders who have perpetrated the greatest homeowner disaster in our history, basically ensuring that millions of Americans have loans with payments they soon cannot afford. Will not afford. So I will be very clear: in my opinion, millions of Americans will lose their homes in foreclosure because lenders put them in products they simply cannot afford.

If you disagree with me, start your own thread. What do YOU know about the lending environment, and what will be its consequences?

Submitted by PerryChase on September 27, 2006 - 12:59pm.

I don't expect the option ARM holders to default when the loans reset to a higher interest rates. I expect them to default when the LTV caps are reached AND the notes have to be fully amortized at a higher rate. We'll see real pain when the payments double. They won't be able to refinance because the houses won't appraise and they won't be able to sell because they'll be seriously under water. 2008 is when that'll start to happen.

Submitted by sdcellar on September 27, 2006 - 1:28pm.

Expected and risk do not mean the same thing at all. Take a look at the now unfortunately cross-posted Critique the analysis, not the person.

sdrebear chose to post the definition of "expect" and if you read both definitions, you'll see that risk and expectations are very different things.

You see the word certain in the definition for expect, whereas you'll find nothing like this in the definition of risk. Sure, expectations aren't always met, but they do imply a much higher degree of realization of the stated outcome.

and lamoneyguy, you are correct, PS never said certainly and I was mistaken to state that (sorry PS!). I think we do agree about the difference in the level of certainty between risk and expectations however.

It's interesting to note that Cagen never used the word expect in his article with regard to the number of defaults because he likely understands the important distinction between the two.

I'm not trying to nit, and I'm not trying to pick on anyone, but I understand where people are coming from on this issue. I, and I'm sure many others, read it as ~1.5 million loans will default because of the word "expect". Had the title read "risk", it probably would have been taken as anywhere from 146,000 to 500,000 or so.

Submitted by woodrow on September 27, 2006 - 2:16pm.

If you disagree with me, start your own thread.


I agree with most of your analysis, and disagree with some.  Does that mean I'm allowed to post the agreeable comments here, but I must start my own seperate thread on the aspects of your post that I disagree with?

Submitted by powayseller on September 27, 2006 - 2:49pm.

Start a thread woodrow - let's see what you've got!

Submitted by sdduuuude on October 2, 2006 - 9:56am.

To summarize my thoughts on this matter from another thread, the problem starts with the lack of clarity by the author. He uses the term "at risk" but never puts a number to it. What does at risk mean? 10% chance of default? 50% chance of default?

Powayseller was trying to quantify this and made an assumption that was not agreeable to everyone. She assumed "at risk" meant 100% default, when we really have no idea what it means at all. I think we all made our own assumption, but powayseller voiced hers as fact.

Submitted by powayseller on October 2, 2006 - 10:41am.

sduuude, your comment is based on skimming the original article and not having read Cagan's earlier work. The preceding sentence was about "masses of foreclosures leading to recession", which you couldn't have if only some of those 19% led to foreclosure.

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