[adios]

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This is only the tip of the iceberg of the mortgage mess. When the mountains of overvalued paper finally get marked down to it's true value, some organizations will be insolvent. So far, everyone is trying to hold off, hoping the housing market turns around so that worthless paper becomes worth something again. They hold off on filing mortgage insurance default claims, fearing that it would trigger an avalanche of claims, wiping out the highly leveraged insurance companies. Every day that goes by without improvement means bigger and bigger losses for the paper holders, until eventually they won't be able to take it any more. Some foreign organizations have not held off, witness the German banks that nearly went belly-up.

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The problems to me were more of perceptions rather than reality in defaults. A lot of the reasons that highly leveraged entities had problems were related to liquidity in short term financing. People didn't want to provide short term funding because they feared defaults. The paper many of these entities collapsed and when that happened the highly leveraged entitities received margin calls on the money that had been lent. This is basically what CFC and TMA went through among others. TMA has never had a thing to do with subprime lending yet they almost went belly up do to the crash in the secondary MBS market. They got margin calls on their repo agreements.