.. the mortgage debt of $10 trillion is actually borne by only 59% of the homeowners. And many of them have paid down their mortgages to a large extent. So a much smaller percentage of Americans carry the lion's share of that $10 trillion in mortgage debt. That's where the risks are.


Default rates for mortgages overall are still low, though they're inching up. According to S&P/Experian First Mortgage Default Index, the default rate rose from 0.64% in May 2016 to 0.74% in February 2017. And they will remain low as long as home prices continue to rise, as they have been in the US over the past years. In an environment of soaring home prices, homeowners, if they get in trouble, can usually sell the home for enough to pay off their mortgage. Hence defaults are not necessary.

Defaults soar after home prices have started to sink from the lofty peaks that in many cities have already shot way past the highs of the prior crazy house price bubble. At that point, the proceeds from the sale of a home may fall far short of covering the mortgage.

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