“THE GUY WITH A BOMB STRAPPED TO HIS CHEST”
“House prices are set to drop in the US for the first time on record, US investment bank Goldman Sachs warned this weekend.” With that statement from a July 29 article [1], we all entered a different world. No longer can Joe Sixpack count on constantly increasing home equity to bail him out of his financial problems. Any significant nationwide drop in house prices will inevitably force many homeowners into default. From now on, investment in mortgages is going to get riskier. And it’s not just individuals who will be affected. These changes will bring new challenges to the big GSEs that form much of the foundation of the US house finance industry. But a murky regulatory environment might well tie the hands of their risk managers at this sensitive time. Today’s post will explore this story. Read the rest of this entry »
