Cash-Out Refinancing During Housing Boom Will Lead to Trouble

Nearly all analysts who write about the housing bubble have focused on the purchasing madness that occurred. While this is important, it overlooks the refinancing insanity of 2004-2007. This refinancing lunacy will devastate mortgage and housing markets for years to come.

You may wonder why I choose to focus on bubble era refinancing. After all, refinancing happens all the time.

Here is why: California was the nation's epicenter for the refinancing madness. During the bubble years, roughly five times as many refinanced first liens were originated there as were purchase loans.