Richard Benson has a great article, “The Housing Tsunami’s Second Wave“, about the second wave of mortgages that are to default.  Below are a couple of things I found interesting in his article that I’d like to point out.

The plan by Fannie Mae & and Freddie Mac to refinance loans up to 125 percent LTV is a failure.  Very few underwater homeowners are falling for the loan modification government scheme.  Even the FHA, which is now making 25 percent or more of all new home loans and will take as little as 3.5 percent as a down payment, has seen late and foreclosed loans jump from about 5 percent last year, to 8 percent today.  FHA borrowers generally have lower credit scores, wages, and job skills.  Since initial unemployment claims are still averaging 550,000 a week, many of these FHA borrowers will lose their jobs, causing an FHA loan default rate of well over 10 percent.

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So how big is the next wave in the housing mortgage disaster?  Currently, one out of eight mortgages is in foreclosure or paying late, and with unemployment averaging over 9 percent for 2009 and 2010 and peaking in 2011, it’s likely one in five mortgages could ultimately default.

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The total losses to come is anyone’s guess, but the $11 trillion in outstanding home mortgages could easily produce over $2 trillion in defaulted mortgages, and another $600 billion of credit losses!

That’s a ton of losses!  

Of course there’s the other side that think this coming nightmare is a big myth.  Henry Blodget, at businessinsider.com seems to think this based from a few sources he cites.  I’ll let you read his blog post and you can decide what you believe.