Kiplinger on the sub-prime mortgage collapse

(I can't bring myself to call it a scandal.)

(This is paraphrased, out of respect for intellectual property rights.)

• Defaults will worsen before they improve. Expect the current wave of foreclosures to last at least another year.
• The worrisome portion of the mortgage market is, of course, the subprime adjustable rate mortgage. But this makes up such a small percentage of the total market that the end is certainly not nigh.
• Our current employment level also bodes well for mortage lenders as a whole. Basic intuition tells us that homeowners default more when they are out of work.
• Housing prices will continue to slide, and Kiplinger's overall economic projection has suffered by roughly one-half of one percent.
  

The commercial mortgage market will not suffer similarly. Even so, we can expect a wave of new regulations:

• The FTC may lengthen its reach into mortgage advertising. (My note: this is as benign a regulation as it gets. The more disclosure, the better.)
• Lending standards between states.
• Sharper teeth and more capital for the FHA, which "loses business" to sub-prime lenders.
• Increased scope for consumer protection laws

My take? Private lenders and private borrowers are finding each other and agreeing on terms. When the borrower defaults, both parties lose. Congress now wants to shut the door on these otherwise voluntary arrangements.