More Home Loan Defaults in 2008 - US Mortgage Losses Could Be $300 Billion

It looks like the Fed is finally waking up to what some of us in businesses related to the housing industry have seen coming for a quite time now: a very rough 2008 with even higher mortgage default and foreclosure levels. This in turn will cause negative pressure on home prices and more negative economic spin off. Remember, already, the number of foreclosures had doubled nationally from a year ago and in some markets the rate is up 500%. Here are highlights from a CNBC story (http://www.cnbc.com/id/21909849):

U.S. Treasury Secretary Henry Paulson said the number of potential U.S. home-loan defaults "will be significantly bigger" in 2008 than in 2007, the Wall Street Journal's online edition reported. "The nature of the problem will be significantly bigger next year because 2006 (mortgages) had lower underwriting standards, no amortization, and no down payments," Paulson said in an interview with the Wall Street Journal on Tuesday, according to an excerpt on the newspaper's Web site.

"We'll watch carefully mortgages that will be reset," Paulson was quoted as saying. The newspaper said Paulson was pressing the mortgage-service industry to help a broad range of borrowers become eligible for better loans instead of dealing with mortgage problems on a case-by-case basis.

Also from CNBC are these additional highlights (http://www.cnbc.com/id/21912074):

Overall losses from the U.S. mortgage market crisis could be up to $300 billion but financial firms and policymakers need to buy time to ensure an orderly work-out, the Organization for Economic Co-operation and Development said on Wednesday.

But the Paris-based forum said the worst of the U.S. housing market downturn had not yet been seen and would continue to depress mortgage-related debt products and derivatives held by banks, hedge funds and insurance companies. "We still have not hit the worst point in resets, delinquencies and ultimate losses on mortgages," the OECD said, adding some $890 billion of sub-prime, or poor credit quality, mortgages will have rates reset in 2008 -- with the peak expected about March.

I hope I am wrong, but personally I think a recession is close at hand if not already upon us.