Another Disaster Waiting To Happen?
This very interesting article on the Motley Fool website, paints a scary picture suggesting that prime mortgages in the US are about to become the new sub-prime.
It suggests that prime mortgage holders are now more inclined to walk away from their liabilities if the negative equity gets large enough. It's an interesting scenario, and one that's quite different to the sub-prime fiasco.
With sub-prime people where given loans they either couldn't afford to repay, or they were such a bad credit risk that they defaulted anyway.
What this is suggesting is that we are about to witness a whole new wave of defaults, indeed the wave has already started, it just hasn't built up to tsunami height yet.
The new wave consists of prime borrowers who may choose to walk away, whether they can afford the payments or not. An interesting slant on everything has a price. You might have a great credit record, you might know that walking away will wreck that and you will never be able to borrow again. But how large a temptation does the negative equity you are in have to get to make you think, hey here's the keys back I'm off?
In addition to that, this article also paints the scary picture that many of these prime mortgage holders are simply sub-primers who got lucky. They cashed in their equity before the crash, and paid off their existing loans thereby elevating themselves to prime status as they improved their credit score.
Doesn't exactly sound implausible does it?
Look away now if easily upset: Scream if you want to go faster
It suggests that prime mortgage holders are now more inclined to walk away from their liabilities if the negative equity gets large enough. It's an interesting scenario, and one that's quite different to the sub-prime fiasco.
With sub-prime people where given loans they either couldn't afford to repay, or they were such a bad credit risk that they defaulted anyway.
What this is suggesting is that we are about to witness a whole new wave of defaults, indeed the wave has already started, it just hasn't built up to tsunami height yet.
The new wave consists of prime borrowers who may choose to walk away, whether they can afford the payments or not. An interesting slant on everything has a price. You might have a great credit record, you might know that walking away will wreck that and you will never be able to borrow again. But how large a temptation does the negative equity you are in have to get to make you think, hey here's the keys back I'm off?
In addition to that, this article also paints the scary picture that many of these prime mortgage holders are simply sub-primers who got lucky. They cashed in their equity before the crash, and paid off their existing loans thereby elevating themselves to prime status as they improved their credit score.
Doesn't exactly sound implausible does it?
Look away now if easily upset: Scream if you want to go faster
