CNBC broke the news today that mortgage delinquencies have hit a new record. With this data point, I think it’s fair to say that the fallout of the credit/housing bubble can now be classified as an epidemic.
Defaults are spreading up the credit ladder causing all kinds of problems in the financial industry. Earlier this week, American Home Mortgage gave us the latest news from the mortgage market: the problems in Alt-A are growing.
The ripple effect of widespread and growing defaults is only now beginning to take its toll on the economy. So far we’ve seen everything from bankruptcies and mass layoffs to outright fraud. What’s still to come is anyone’s guess.
The real problem is that credit is a drug and the dealers (banks) have been selling a very lethal form of it: exotic mortgage products. With the promise of untold real estate riches many got high on these things. The high is now over and the housing market is seeing the beginnings of withdrawal.