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Strategies & Market Trends : Ride the Tiger with CD

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To: Rocket Red who wrote (88714)	8/17/2007 10:53:15 AM
From: LoneClone	Read Replies (4) of 313362

Perspective from Laurence Roulston: “First, sub prime mortgages represent only a small portion of the overall mortgage market in the United States. Actual defaults on sub prime mortgages have been about 5% to date. So far, 85% of borrowers in that market continue to make timely payments. Inevitably, the default figures will get worse. But, remember, those loans are all backed by real estate. Undoubtedly, the value of the real estate will fall short of the loan amount in those cases where the borrowers default. To explore the potential implication, assume the delinquency rate was to soar to 25% and, as an example, suppose that in each of those cases the realized value of the collateral falls 25% short of the loan amount. Then, the overall sub prime market would lose about 7% of its value. That is hardly a catastrophic event for the world economy.” LC

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