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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: $Mogul who wrote (97342)	12/13/2007 4:00:57 PM
From: Perspective	Read Replies (1) \| Respond to of 306849

Thanks, but I screwed up all sorts of math in there. <g> The home equity + option ARMs totals $60B, not $50B. Say 1/5 of the home equity loans go into foreclosure: 100% losses on 20% of $32.5B would be $6.5B without even considering option ARMs. Now assume 1/3 of the option ARMs go bad. Those could easily average 40% losses given fraudulent appraisals, foreclosure sales, and negative amortization. That would be $27B/3 * 40% = $3.6B. The total damage to CFC's balance sheet from option ARMs and home equity lines could conceivably exceed $10B. That would go a long way toward wiping out their equity, and make it virtually impossible to raise cash going forward. `BC