Economist Sees Big Spike in Foreclosure Losses

The chief economist of Moody's Economy.com says he expects mortgage credit quality to "erode measurably" between now and the summer of 2008.Speaking with reporters on a conference call, prominent housing economist Mark Zandi predicted that the industry will see slightly more than 1.2 million mortgage defaults this year and 1.3 million next year. By contrast, about 800,000 mortgages defaulted in 2005. Mr. Zandi said those defaults will lead to about $125 billion of losses for investors in mortgage-backed securities, an estimate significantly higher than Federal Reserve Board Chairman Ben Bernanke's recent prediction that the subprime lending crisis could cause $50 billion to $100 billion in losses.

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