The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Tradelite who wrote (4557)	8/20/2002 8:09:01 PM
From: patron_anejo_por_favor	Read Replies (1) of 306849

<<I'm wondering if a more accurate term for this alleged bubble would be "credit bubble" rather than housing bubble.>> Well the two are inextricably linked. The hub of both bubbles is FNM/FRE and the other GSE's. As long as the risk of mortgage lending can be easily off-loaded away from loan originators, assessment of credit quality of borrowers will suffer, and loan pricing will be incorrect as a result. The whole phenomenon has been made worse by erosion in the requirements for ample down payments/equity on the front end, and by cash-out refinancings on the back end. In the end, borrower/homeowners late to the party (especially in the most speculative markets) AND lenders who end up holding the mortgage paper (money market funds, insurance companies, pension funds, Fannie and Freddie through their retained portfolios) will suffer. As well PMI's of course...

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