Mortgage Bubble Haunts Housing Recovery

There's another major financial bubble ready to burst - the mortgage market
There's another major financial bubble ready to burst - the mortgage market

You may not realize it, but there's another major financial bubble ready to burst. Few are talking about it, but Michael David White, a mortgage and real estate professional has graphed the mortgage bubble due to burst.

When the housing bubble burst, it left many with underwater mortgages. Yet nothing was done to deal with the debt levels on these homes. The mortgage values shown on the banks' books are still elevated beyond their true worth.

Right now we're seeing more and more people walk away from this debt. While property values fell from $20 trillion to $13 trillion when the housing bubble burst. Mortgages fell from $11.95 trillion to $11.68 trillion.

John Lounsbury, a financial and investment adviser, says home equity is now over 90 percent mortgaged. Historically our mortgage levels were 50 to 60 percent. He agrees with White that we're in a mortgage bubble that is ready to burst. In order to get back to the normal historic relationship, Lounsbury says "outstanding mortgage values would need to be about $7 trillion, which is $5 trillion below the latest level."