What if falling home prices blow up the reverse-mortgage tail?
Direct chain: falling home prices push HECM balances above collateral, crystallizing FHA/MMI-fund and insurer claim losses — HY credit and mortgage-exposed financials (and FHA-heavy lenders) mark down. Rhymes with 2008 negative-equity/MI blowups (PMI, MGIC, Radian fell 80%+). But HECM is a small, government-insured tail, so contagion is capped; play it as a relative short in mortgage insurers / FHA originators, not S&P beta.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Falling home prices push reverse-mortgage balances above collateral, triggering HECM program losses and insurer claims. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.