He expects a 20% decline in home prices and huge defaults in the ALT-A space.

This is not going to be a good thing..... he is not predicting that the economy will collapse.... that may be an overly optimistic view. There's a cascade effect here that I suspect is being not taken into account with any sort of accuracy.

He also thinks that prime mortgage owners will hold on through a 20% decline? I think that may be overly-optimistic too. Certainly those who bought 5 years ago will, but how about those who bought in the last year? Its verrrrry tempting to walk off, especially if there's any sort of instability in your personal life, when you have no skin on the table - and a 20% decline in prices removes a lot of people's skin.....

He's also expecting Moody's to downgrade everything from AAA on down in mortgage backed securitized bonds...... ouch. THAT, if it happens, destroys the ALT-A space and the balance sheet of most ALT-A lenders.

One thing he does expect is that the rental inventory will increase dramatically. That's a good thing.... if you're a renter!

He's talking about $1 trillion in losses on ALT-A paper.

What percentage of the GDP is that? What sort of leverage has been taken against these securities? Ken's talking about the leverage angle too - this is not in any way positive and in fact could be incredibly bad.

This is just beginning folks......