More Foreclosure News
All the financial publications I have read today and tonight have articles about the mortgage market. The most troubling is this one about one of Bear Stearns' hedge funds. It invests in mortgages, including subprime mortgages, and earlier this week it had to sell $4 billion of its quality mortgages to meet margin calls. It is not a good sign if a Bear Stearns-related firm is in trouble. Bear Stearns has an excellent reputation and is known for its discipline and risk controls. I am worried about other mortgage surprises lurking in the near future from firms that don't have Bear Stearns' controls.

This article reports that defaults are at record levels, which is stating the obvious. I am waiting for the articles about how higher rates are causing defaults, especially on adjustable mortgages, and how prices are declining because of the rate increase.

I think the rise in rates has peaked. Rates need to drop to protect the housing market. The amount of defaults, and their translation to the overall economy, will begin pushing rates down soon.