Subprime mortgage meltdown
The slowdown in real estate is seriously affecting the mortgage market with some suggesting a meltdown in the subprime sector. I've suggested recently that those who have adjustable rate mortgages that will reset resulting in a higher monthly payment should refinance to more conventional fixed rate mortgages and everyone should avoid the more exotic mortgage products available. One of the problems facing some borrowers is that they didn't understand the future consequences of the mortgage they selected.
With all the news about subprime lenders closing their doors, filing bankruptcy, tightening underwriting standards, etc., the sad reality is that some subprime borrowers might not be able to refinance because the same programs they first qualified for in order to buy a house or investment property may no longer be available.
There are a variety of websites and blog posts related to mortgage lending, subprime mortgages and the housing bubble. (Speaking of websites dealing with the housing bubble, I still can't figure out why people would cheer for bad news, and who is reading this stuff anyway and why? - the only explanation I've heard that makes sense is that the authors are selling ad space on their sites and profiting from attracting large numbers of readers.)
HSBC (Hong Kong and Shanghai Banking Corporation) was the first to shock the market with their announcement in early February that they were setting aside additional reserves to cover bad debt expected to be 20% higher than forecast. HSBC is the 3rd largest bank in the world and smaller lenders immediately started toppling. Large banks who were buyers of some of these bad loans demanded the sellers buy them back (now that is really a good one, if I could sell back some of the lousy investments I've made in my life for what I paid for them, it would be really nice.) But maybe because they're bigger and better than me, they can actually do it, or at least try, if there is any money left. There are predictions some mortgage fraud will be discovered and I would expect some kind of hit to the financial system. Of course, if that would occur, the US Government would likely step in and help out, in plain English or American, such as it is, that means the taxpayers will bail out the losers.
Here are some links to some interesting stories and websites relating to what is happening in the mortgage industry. Lots of good reading!
Sub-prime gloom picks up after HSBC warning by Simon Kennedy at Marketwatch
The Mortgage Lender Implode - O - Meter by Aaron Krowne
Is the Subprime Mortgage Market the next Enron by Brian Brady at Bloodhound
There's No Love for the Subprime Borrower by Rhonda Porter at Rain City
The Subprime Mortgage Default Opportunity by Watch your wallet
The Mortgage Report by Dan Green
Seeking Alpha - assorted posts
An Insider's Guide to the Mortgage Industry by the X Broker
Last but by no means least, Mortgages Undressed by the great Larry Cragun