Now, Even Borrowers With Good Credit Pose Risks

http://online.wsj.com/article/SB119802116320237959.html

"In an interview last week with Wall Street Journal editors, Kenneth Lewis- CEO of BofA- expressed concern that even borrowers with strong credit scores might turn out to be default risks if housing prices keep tumbling. In other words, what is being portrayed as a credit-quality problem with the riskiest 20% of the mortgage market could spread to a much wider cross-section of home loans."

"In such an environment credit scores don't really provide a definitive gauge of how hard a borrower will work to avoid default, says Mark Zandi, chief economist of Moody's Economy.com Inc., a West Chester, Pa., economic-research firm. A better test, he says, is how much equity owners have in their home. If they have a lot at stake, default becomes almost unthinkable. Without much equity, the commitment to keep paying the mortgage, no matter painful that may be, begins to dwindle."