SDBear, I disagree with your conclusion. (“The problem is not the amount of additional credit or interest paid, but the number of people affected.”)
You only need 2% of the sellers in San Diego in distress, to bring the home prices down for the other 1,075,000 homeowners. Homes sell at the margin, and this is a point that is often overlooked by the even the experts. Their conclusion that “this won’t affect the economy, because only a small percentage of borrowers are over their heads” is complete baloney.
The truth is, home values are determined by 2% of the people, the current sellers on the market.
vrudny, great post as always. I hope to meet you and your wife at the next meet-up. Back to Fannie Mae: I also think they’ll be in big trouble, and I sold my FNM shares when they were near $75, at their peak. That makes up for my bad moves in COP, right? How much do we really know about a company who is several years late in submitting its financial statements, and how can we short a company that is so babied, that despite its lack of financial statements it has not been delisted from the stock exchange? The MBS blow-up is going to hurt them, too, but probably it will all be covered up, as are many of their current problems.
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