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To: chomolungma who wrote (174877)6/24/2003 7:21:10 AM
From: Amy J  Read Replies (2) of 186894
 
Hi Chomolungma, RE: "the house is almost always profitable."

Let's hope so, otherwise those consumers who are tapping into their house equity, might instead distribute their pain to investors.

Do you have a chart on housing prices corrected by inflation? My prices weren't adjusted for inflation.

RE: "But derivatives are very misunderstood. The numbers you generally see are the "notional value" of the contract."

What's the max risk? Shouldn't the absolute worse case be obvious & easy to define - just a matter of setting all variables to the worse possible case?

Also, what is the actual risk here? As far as I understand, their (Fannie & Freddie) risks are two-fold: people pay off their debts too early (forcing the lenders to replace old profitable loans with new loans whose interest rates are lower, thus decreasing their profits) and when interest rates eventually rise the potential for bankruptcy goes up (creating more risk for the lender since it guarantees loans.)

I'm interested in learning the scope of the risk. If it's really on a smaller scale than the LTC (as you or Robert implied), then what's the big deal? Aside from the very annoying possibility of bailing financial lenders out for their irresponsible lending practises, if it's smaller than LTC, then what's the scare about?

What's worse case scenario and how big?

Regards,
Amy J
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