[DRey]

"Current exposure: $480 Billion"

That current exposure is $480 billion for THIS 30-DAY PERIOD. Why only double the default rate? What about 30 days later when the 60-dayers go 90, and 60 days later when the 30s go 90, and 120 days later and 150...? Do we spend 576 billion per month (or half that by your calculation) until all the deadbeats are out of the system? How long will that take? Are we shutting down govt. backed loans for good to prevent further hemoraging?

[PhilosopherStones]

That’s why I posted the hypothetical doubling.

Most of the sub-primes are already out of the system.

Next up is Alt-A (No doc, but good credit rating).

After that will be prime.

At each level, we get a greater percentage of the total US mortgage market, but a lower percentage of defaults (Primes had their ability to repay checked and, generally, were smarter about the types of loans they took).