If home prices level off, there will be a considerable impact on housing credit performance in the alternative real estate markets (ie. Jumbo, Alt-A and subprime products), according to a report released last week by UBS Warburg. The incident would "cause defaults to rise, and would boost loss severities to an even larger amount," wrote analysts at the firm.

Additionally, if housing appreciation stops, the cash-out phenomenon will slow significantly, something that could have a major impact on the overall economy.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.