Five years ago nobody knew what "subprime" meant - now it is a buzzword for overeager lenders who got caught lending to less than creditworthy consumers during a falling housing market (but I thought real estate could never go down???).
If you still don't really know what the whole mess surrounding "subprime lending" really means and how it might affect you then I encourage you to spend a little time with the Mortgage Professor, Jack Guttentag. I've provided links to his series on the subprime mess, as follows:
Subprime Crisis Part I, The Causes of Default
Subprime Crisis Part II, The Lender Role
Subprime Crisis Part III, State of the Market
Subprime Crisis Part IV, What Should the Government Do?
Subprime Crisis Part V, Can the Market Be Replaced?
We can thank Yahoo:Finance for providing Jack to us free of charge.
By the way, this stuff was all predicted well in advance, but nothing happened because Real Estate was still going up, now that it is steady or falling and short term rates are higher (not to mention tougher credit standards), this all starts falling apart. Easy to predict, difficult to predict when.
Scott Dauenhauer, CFP, MSFP, AIF
