Update on the "Mortgage Crisis"

As per numerous requests, here is an update on the current status of the mortgage market:

-----NEWS FLASH-----
For the most part, everything is fine!

Some loan programs currently are not available due to the suddenly risk-adverse secondary market (where mortgages are bought and sold), but in almost all cases there are work-arounds that may actually be better programs in the first place!
(end news flash, begin commentary)

Consider for a moment the potential size of the "subprime collapse," which is what brought us down this road in the fist place: most estimates suggest that as much as 20% of current subprime mortgages may end in default.

What does that really translate into? Let's put things into perspective:

The bond market, which includes the secondary markets where mortgages are typically traded, is approximately $27 trillion. It is by far the largest securities marketplace in the world, and is roughly twice the size of the U.S. stock market.

You read that right, it is two times larger than our stock market. That makes the U.S. a 40 trillion dollar economy based on our stock and bond markets.

(By the way, these aren't my numbers -- go here for the Financial Industry Regulatory Authority, Inc. 's Web site.)

By comparison, the total amount of outstanding subprime mortgages is estimated at 1.3 trillion, equal to approximately 5% of the bond market. If 1 out of 5 subprime mortgages defaulted, that would be $260 billion. That is less than 1% of the U.S. markets. The entire subprime market is 3% of the total markets.

In all fairness to the doomsday'ers, we're beyond just the subprime market now, into other areas of the mortgage market and beyond into local retail economies; however, based on the numbers above do we throw in the towel at the mere "possibility" of a collapse or loss equal even to the entire subprime mortgage market?

I've heard it too, all this talk of a crisis and a recession. I have decided not to participate... care to join me?

If you disagree, let me know because I'm happy to sell you a band uniform and the instrument of your choice.

'Cause there's TROUBLE (trouble, trouble) right here in River City...