In previous decades people with high risk mortgage loans often left financial companies holding the keys when rates started to go up.
But according to a recent study by First American Real Estate Solutions, even if rates do start to climb this year, the number of defaults this time around is not likely to go much higher than $110 billion.
The study estimated 1.4 million of 7.7 million adjustable rate mortgages sold in 2004 and 2005 would be at risk of default. But even if that many households were to default, the financial fallout would be limited.
The reason: the US economy is so strong this time around, and so diversified that this amount represents only about one percent of total national homeowners’ equity, and it would be spread out over two or three years. So the economy would be more than able to absorb the losses.
**Factors driving continued Real Estate boom
While many real estate experts predict a slight slowdown in real estate and mortgage activity during 2006, most also see steady gains, with continued economic growth and well-balanced supply/demand ratio in the housing market.
Some of the factors driving the real...
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