September 5, 2008

Mortgage Meltdown Blues

It's impossible to say yet whether we've fully weathered the mortgage crisis. Things look to be stabilizing but if the economy turns down much more there could be another tsunami of defaults, this time among prime borrowers with negative equity who decide to walk away from their homes. Something that's both economically rational and, perhaps surprisingly, legal (although culturally frowned upon). We'll see. My own view is that we won't have put the crisis behind us until we start to re-regulate financial institutions, but at the moment that isn't taken to be a serious option in Washington. To get a sense of what's happening from the field I turned to Paul Muolo, co-author of the recent Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis, and executive editor of National Mortgage News, the leading trade publication of the industry. Paul has broken many of the stories in this crisis and understands the situation as well as anybody. It was kind of him to talk with me, which I much appreciate. Total runtime forty eight minutes.