Re:Anxiety Strikes $8T Mortgage-Debt Market After SVB Collapse
by ameister14 on Tuesday March 21, 2023 @11:16AM
(#35247435)
Sure, if the entire economy collapses people will start to default on their loans.
What happened in 2005-2008, though, was people defaulting on their loans caused the economy to collapse.
So while a low-risk loan can become higher risk depending on circumstances, classifying an existing high-risk loan as low-risk to improve your bottom line is never a good idea.
The "risk level of the individual" is totally wrapped up in how well the economy is able to provide people with adequate amounts of income to pay off debt, and that's not something any individual can determine. If there are systematic shifts that make it much more difficult for individuals to keep paying their debt, those individuals will become "high risk individuals".