Its not about defaults, its about ability to sell the assets.
The buyers are drying up, for all mortgage backed securities... REIT’s and others are moving away from the market. Without buyers for the paper, money available for mortgages evaporates... and you wind up with just funds of the lending institution tied up in the loans so they will cut back and lessen lending, raising rates, further eroding home values, and the value of already existing properties and paper... etc etc etc..
This won’t happen as fast as the tech bubble, but its impact will be far far broader.
“This won’t happen as fast as the tech bubble, but its impact will be far far broader.”
From here, and given what is already priced in to the mortgage co’s and home builders, what sectors would be vulnerable as the ripple effect expands?
Yes. Because of fear -- market psychology is again driving this. Its an issue, for sure, but I believe this is a long overdue repricing of credit risk.