Another consequence of rising interest rates is that the money flocking the MBS, CDO will flee back to where they came from in an instant. Why deal with this crap when you can get a better rate from a more stable place. There will be no more “easy money” coming down the chain and the banks will be forced to realize whatever they can get out of the properties they are sitting on right now. In addition to this resulting in lower prices, the new mortgage applicants now have to prove that they “deserve” a loan in addition to putting a good percentage as a down payment. So why should anybody who has good credit, can pay >20% down in cash and has a good stream of documented income worry about rising interest rates?
