Sunday, September 02, 2007

One worst case scenario for how the mortgage mess is playing out

I continue to be very skeptical of a lot of the worst case scenarios being put forward for how the mortgage mess will likely play out at the national level. Nonetheless it makes sense to look at the specifics of some of these worst case scenario and see what we can learn. There is an article in The New York Times by Nelson Schwartz entitled "Can the Mortgage Crisis Swallow a Town?" which does give us a fair sense of how the mortgage mess is playing out in one worst case scenario. The bad news is that it is fairly bad. The good news is that this one example is rather atypical. The other good news is that the article does show how there is a growing groundswell to help a fair number of these homeowners get out from under their onerous mortgages and start fresh without the need for bankruptcy or foreclosure.

Sure, the number of homeowners faced with possible foreclosure could well rise significantly over the next six months, but the number of lenders and aid groups willing to help homeowners restructure away from foreclosure is likely to rise as well.

I do not deny that there is a mortgage mess that is likely to get somewhat worse, but there doesn't appear to be any justification for not believing that most homeowners and most communities will actually do somewhat better than the doomsayers are insisting as a foregone conclusion.

And, all of this is well before the politicians have even started to step into the fray.

-- Jack Krupansky


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