Last week, former Federal Reserve Chairman Alan Greenspan told futures traders at a conference in Florida that if home prices would just go up 10 percent, "the subprime mortgage problem would disappear." You have to wonder whether Greenspan got an advance copy of one of the most sophisticated studies to date on a question that's keeping a lot of people awake at night: how much trouble are America's homeowners in? Like Greenspan's observations in Boca Raton, the study -- by Christopher L. Cagan, director of research and analytics at First American CoreLogic Inc. -- will undoubtedly be used as ammunition by doomsayers and optimists alike. On the first page of the study, "Mortgage Payment Reset: The Issue and the Impact," Cagan makes it sound simple: in the next six years, 13 percent of the 8.37 million adjustable-rate mortgages originated between 2004 and 2006 will default. That's 1.1 million foreclosures in a six- to seven-year period, and $112 billion in equity wiped out af...
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