There is a lot of good information available from mainstream media sources (like this one) and online about various aspects of this problem. Revealing Congressional hearings are available, plus a lot of stuff from the regulators. An excellent place to visit for a "bearish" perspective is a blog called Calculated Risk (especially the comments under the articles). Blanche Evans, editor of the RE industry's Realty Time often writes good stories.

Bottom line, dig around the internet a bit, you'll be amazed what you can find.

Cheers, John McLeod, Halifax, Canada
http://HousingDoom.com

Sent by John McLeod | 12:36 PM ET | 03-20-2007

I am a mortgage professional w/12 plus years of experience. This problem was not unexpected; the people who created these "exotic" programs have no clue as to who they're dealing with. I'm African American, and I know the missing link was a lack of education. We're attempting to inspire a natl discussion & education about the problem as I write a book about it

Sent by Madeline Sanders | 2:06 PM ET | 03-20-2007

The shorthand terminology used to discuss the mortgage crisis is inaccurate and misleading. It is said that subprime mortgages are for people with poor credit. The truth is that lenders created the problem by giving loans to people on fixed incomes or no verifiable income; further, many of these "subprime" loans interestingly are given for properties with vastly inflated appraisals. There is rampant mortgage fraud. Federal regulators have turned a blind eye over the last ten years to facilitate the marketing of junk asset-based securities.

Sent by Rheba | 2:14 PM ET | 03-20-2007

How about those of us investing in certificates of deposit at any given bank?How would we know they are at risk?
How can we be sure our savings are secure at a bank holding risky mortgages?

Sent by Daniel Brown | 2:19 PM ET | 03-20-2007

Why should the government bail out people who did not do due dilligence before buying properties that were beyond their reach? Many of these people also treated their homes like a piggy bank, taking out repeated loans on their homes for consumer spending.

Now the chickens have come home to roost and all taxpayers are being asked to bail out the defaulters! Ridiculous.

Sent by Vikas Chowdhry | 2:20 PM ET | 03-20-2007

My husband and I were relocating for a career change he made. Our credit was good, but we lacked income to pay the loan for a period of time. Nevertheless, the over-eager lenders were trying to get us to state we would make enough someday to pay for the loan. Their over-zealous nature caused us to back away - something seemed too good to be true. Now it turns out it was! We put off purchasing, and now as housing prices fall, we're glad we don't owe lots more than we could afford.

Sent by Susan | 2:21 PM ET | 03-20-2007

My husband and I bought our first housein December 2005 and got an ARM whose rate will increase when we hit the 2-year mark. We also have a prepayment penalty (the kind based on a percentage of 6 months interest) that we will be charged if we sell or refinance before those 2 years are up (December 2007). We want to be sure to refinance before the ARM goes up, but don't want to pay the prepayment penatly, so we weren't going to start shopping for a refinance until the late summer/fall. We both have credit scores of 700 at this point and good income. Is this a good plan? Any suggestions?

Sent by Anne | 2:25 PM ET | 03-20-2007

Per the San Fran Chronicle today:

My comment:

Who will pay to bail out the people who put no money down - where will this money come from (our national debt is 9+ trillion)?

I say let the foreclosures occur which will allow the prices of homes to decrease naturally and become more in line with wages!

Sent by Russ | 2:28 PM ET | 03-20-2007

I am thinking of buying a home, but I'm getting scared from the stories I hear and I a mnot sure even if the house would go up in value with this market

Sent by Sam | 2:30 PM ET | 03-20-2007

I would imagine most people loosing a home should not have bought one in the first place, so it's not like Oh My God a homeowner is losing their home let's help them - it's more like a renter got into a home prematurely and likely "falsely or illegally" for a couple years and learned their lesson - next time they'll be smarter and do it the right way.

This is a good thing because it will bring the prices back to where 1st time buyers can "really" afford to buy a home. Artificially propping the market up with a bailout will just keep the problem from fixing itself as markets tend to do in the end.

Let the market play itself out and then you don't need a program and regulations to help people buy an unaffordable house - because they will become affordable on their own.

I's not rocket science.

Sent by Johnnn | 2:31 PM ET | 03-20-2007

My husband and I bought our first home three years ago after we graduated from college. Our income excluded us from many low rate, first-time buyers loans, so we bought our house with an arm. Can you explain if this is part of the sub-prime market, and what might happen to us in two years when our arm expires

Sent by Sarah | 2:32 PM ET | 03-20-2007

While some subprime borrowers are victims of fraudulent mortgage lenders, the majority of borrowers essentially chose not to go with conventional mortgage loans. They're either unwilling to wait or spend the money to improve their credit ratings and chose to go with riskier loans. Perhaps they're motivated by greed to get into a "hot" real estate market, perhaps by impatience to own a house, any house ASAP. Regardless, they've made their own beds.

The rest of us are going to pay for this mess indirectly in our retirement accounts; I'm sure many pension funds and 401K investment managers hold some of these risky mortgages and will only see pennies on the dollar. I don't want the government to step in and increase our "out of pocket" and encourage further moral hazard.

Ultimately, I see this quite synonymous with the dot bomb boom and bust. People should take responsibilities for their own choices.

Sent by Karl | 2:35 PM ET | 03-20-2007

What should I do to be sure that I get a loan that I can afford?

Sent by Jeff | 2:36 PM ET | 03-20-2007

We tend to be a nation of people who do not take responsibility for our actions or own lack of knowledge. People who sign legal documents and take out loans, should get themsleves informed BEFORE they mortgage themselves up. I do not feel sorry for them. Take charge of your own lives people! Life and homes are not free or easy...

Sent by Jason | 2:37 PM ET | 03-20-2007

I worked in the mortgage industry for 30 years as a low level employee...the problems of boom/bust, buying too much house, etc., are part of patterns that seem to cycle round and round...almost like long term weather cycles...the mortgage business, particularly subprime, can be as pernicious as the credit card trap we're hearing about too.

Sent by Bobby Flemming | 2:42 PM ET | 03-20-2007

The Federal Reserve has policing power over the industry where subprime transactions originate. They basically know where every dime in the country goes and how it is made. They had to forecast this fallout from the subprime market. Why do you think the Federal Reserve allowed it when they could see in their forecasts that these loans would create many, many foreclosures once the real estate market cooled?

Sent by Nino McDonald | 2:44 PM ET | 03-20-2007

One under-publicized aspect of this phenomenon is that many loans were given to illegal immigrants, the most vulnerable segment of our society. And often these deal were facilatated by members of their own communities.

No legal residency requirement is required for purchasing real estatre in the US.

Sent by Dana Benedict | 2:45 PM ET | 03-20-2007

There is a wonderful resource available to people facing loss of their homes. 888-995-HOPE is a nationwide, toll-free number operated by the non-profit Homeownership Preservation Foundation. HPF was created to provide homeowners in financial trouble with a specific, actionable plan that can help them avoid foreclosure, or explore alternatives to foreclosure if homeownership cannot be maintained. Assistance is available nationwide, 24 hours a day, 7 days a week. Participating home lenders and the foundation cover the cost of the counseling.

Sent by Michael Grimaldi | 2:47 PM ET | 03-20-2007

I am an attorney in New Hampshire who has extensive experience in real estate financing and foreclosure. The problem of subprime loan default involves a host of issues. Most people have very little education in basic finance and budget management. I would posit that most students graduating high school these days cannot even balance a checkbook ledger. Many borrowers enter into a home loan transaction without considering the effects of rising property taxes, maintenance costs and adjustable rate mortgages and the like. Given the fact that many live pay check to pay check, a single financial set-back can cause a downward spiral to foreclosure. Another factor is that nobody involved in the deal makes any money unless a loan moves forward, including the mortgage broker, the appraiser, the real estate broker, the home inspector and the attorney or title company. This, in my view, provides too much motivation to convince a prospective buyer/borrower to close a loan which may not be in their best interests. In addition to this, many people believe that a rising real estate market is endless and they lack a memory of of what a real estate crash is like. This led many to doing 100% financing for purchases and very expensive refinance for homes already owned.

Sent by John | 2:53 PM ET | 03-20-2007

To the people commenting on buying or refinancing a house. 1st shop your local bank... if they say "no"... shop at least 3 mortgage brokers. Stay away from the heavily advertised ones. They charge a ton in fees. An actual bank will never outright hurt you where a mortgage broker could. Shopping at least 3 brokers should give you an idea of the market... get quotes and promises in writing!

Sent by Dan "who has been a mortgae man" | 3:04 PM ET | 03-20-2007

For the multitude of us watching the past few years as folk cheerfully indebted themselves with mortgages at 5 to 10 times their earnings, convinced by NAR blathering that "real estate always goes up", I can only say, let the buyer beware. This is the biggest r.e. bubble since 1930, and no amount of moaning will change its course. Bite the bullet, and get on with saving - an odd concept recently in our good old US of A. Buying a house right out of college? You have to be kidding. There is a wholly avoidable world of pain beginning, and I have no pity whatsoever for folk who failed 8th-grade math. Hard lesson, but aren't they all? Bailout? Of lenders? Of borrowers? You've got to be kidding.

Sent by Mary Lee Stromquist | 3:05 PM ET | 03-20-2007

Naturally these mortgages have been resold and resold. Who now hold the bulk of these mortgages is not clear. I'm wondering if Chinese and Asian Banks have become owners of large residential real estate holdings in the US.

Sent by Dan Benedict | 3:15 PM ET | 03-20-2007

Some lenders are vindictive and will not work with borrowers having problems. My lender, T.C.F. Bank, committed TILA and Consumer Fraud Act violations at the beginning of my mortgage. After my adjustable rate mortgage went up to more than 9%,I attempted to refinance 3 different times so I could pay them off, but they contacted those other lenders and told them not to allow me to refinance. They spent more than a million dollars in legal cost on my $250,000 mortgage. I eventially defaulted on the mortgage because I could not refinance my adjustable rate mortgage and couldn't afford the $600 a month increase. During the eviction, the sheriffs terrified my family and my sister was rushed to the hospital with a stroke. And on top of that, one of the seriff's deputies stole some of our valuables. We lost our health, our home and entire life savings because a preditory lender would not allow us to refinance and pay them off. And the Chancery courts in Cook County will not help borrowers who are victims of preditory lenders. They are only loyal to lenders, even if they disregard Truth in Lending and the Illinois Mortgage Foreclosure Act laws. My heart bleeds for all those typically, financially unsophisticated, minority and senior borrowers who have or will soon lose their most valuable assets, their homes.

Sent by John Hanno | 3:19 PM ET | 03-20-2007

The real issue IS NOT subprime borrowers! The real issue is the Feds having raised interest rates consistently for the last two and a half years! Anyone, prime or subprime, fully documented or minimally documented, who closed on any type of adjustable mortgage in the last several years, even those ever popular 3/1, 5/1, 7/1 and 10/1 interest only ARMS, will be in for a VERY brutal awakening when they calculate their new minimum monthly payment at the first adjustment. The one year treasury bill has gone from 2.02 in August of 2004 to 5.1% as of the first of last month...so basically every borrower with an ARM will be effected by MUCH higher increases in mortgage payments than they expected.

Sent by Laura Gomes | 3:29 PM ET | 03-20-2007

My wife and I own a title insurance agency. We specialize in Sub-prime mortgages.

For all those worried about buying too much house, or about getting a bad deal, the answer is simple. Don't pose as a victim, helpless and intimidated by the process. There are many steps to the process; don't let anyone push you around. Choose each step carefully, and you won't fall. If you run and fall, don't say you were pushed.

1) Read a book. Start with one of the popular authors you see on TV--one you like. Avoid any get-rich themes. You've just wasted the price of that book. Throw it away now, and accept the relatively small financial loss. Visit the www.HUD.gov web site.

2) Ask around. Ask neighbors, family and friends. Filter the information. You want a good mortgage broker or a good bank officer, not a relative who will give you the family discount.
If you're in a new area, check with the Better Business Bureau and with your state regulator. Call the Attorney General or State's Attorney to get that information.

3) Ask them for references, and follow-through. Pretend you're shopping for a baby-sitter? You are. They are baby-sitting you and your future.

4) Get a second opinion. The federal law that governs mortgage transactions, the Real Estate Settlement Procedures Act, really makes this assumption. Don't sign for a loan if you don't comparison shop.

4) Read the paperwork. If you don't understand the contracts, get someone you trust to explain them. If you don't know someone and don't understand, rent. Really.

Buying or refinancing a home is the biggest decision you will make. Don't rush. Don't be afraid to slow down the process until you are certain you know what you're doing and who you are doing it with.

Sent by Scott Cheffer | 3:32 PM ET | 03-20-2007

Victims are not only minorities or the elderly... Anyone not in the mortgage or banking business could be potential victims... but just like everything in life... you better read and understand the product you are buying. In the end we are all victims. (The tax paying public which will fund some type of gov't bailout). It was too easy for too long and too many people trying to keep up with the Jones' w/credit cards and their ATM homes.

Sent by Dan | 3:47 PM ET | 03-20-2007

The real issue IS NOT subprime borrowers! The real issue is the Feds having raised interest rates consistently for the last two and a half years!

It IS not only a sub-prime issue. It is an issue that will affect all mortgagees and all buyers and sellers. It will affect the economy as a whole.

The problem is not about RAISING intest rates. The root of the problem is that interest ratges were left far too low for far too long. Too much money was being pumped into the economy, combined with loan offerings that allowed people to buy more house than they could really afford.

Introductory rates are not much higher now than a year ago. Problem is that people are locked into bad loans and many don't even realize there is a problem.

Sent by Paul Langer | 3:50 PM ET | 03-20-2007

I have noticed that all lenders--mainstream and subprime--seem eager to lend people too much money. My spouse and I purchased a home in 2004. Our household income runs about $100,000. We're both professionals with graduate degrees, have high credit scores, no debt outside a mortgage and some savings in an IRA. We were looking to spend about $250,000 with 20% down. We were quite surprised (not only by the hyper inflated home prices in Cook County IL) but also when a mainstream lender told us we were prequalified for up to a $$488,000 mortgage.

Being in my late 50's I remember the old days in which lenders did exhaustive research on mortgage applicants and your mortgage payment should amount to no more than I believe 25% of your gross pay. Our recent application involved a ten-minute phone call and a one-page application form in which no supporting documentation was required)

I have noticed many of my younger colleagues are taking their $100,000 to $150,000 household incomes (along with two car payments,no savings, and LOTS of liesure spending) and purchasing $750,000 homes.

My observation, although anecdotal, is that while sub prime lending is an issue, would an equally dominant issue be the overspending on housing by younger adults (mostly working professionals) who have never lived through an economic downturn? Could an implosion in this area affect the economy in a far worse way?

Sent by michaeldavid | 3:55 PM ET | 03-20-2007

I'm a Loan Officer in Idaho and my firm has never had a defaulted loan because we as a Mortgage Broker realize the housing boom turns around, and we as professionals should act professional and procure the most economical deal for our clients and live up to the agreements we signed with our lenders to ensure these would be good loans that are clients could legitamely afford. I feal that there are a lot of issues leading to this situation that we are in, but the comment by Laura Gomes strikes a deep chord. It became increasingly attractive to operate "garage mortgage shops" and have completely uneducated LOs start up buisness and rely too heavily on their subprime Account reps to get the loans taken care of for them. So what does this mean, it means that the fed made it more attractive for people to be uneducated loan officers and allowed them to place people in loans when the market was nearing its pinnacle when those LO's truely did not understand the effect their loan placement would truely have. The lenders right now realize to stay afloat they have to tighten up their guidelines, which is where the tightening should take place. However now it is time for the state governments to realize it is thier constituents they are hurting by allowing second rate LO sharks to lie and committ fraud so they can earn a buck and kick their client to the curve. So my advice to the consumer to weed out the uneducated and greedy LO's by being proactive and taking three days to see three referred and or established Mortgage Brokers and make sure they all pull your credit report while you are there because your score will not be effected by credit pulls 14days after that first report was pulled and bring in your 2 years tax returns and/or W2s with last 2 month bank statements. If the LO knows their job they will be able to give you a Good Faith estimate with the rate and program immediately or by the end of the day after they make several phone calls.

Sent by Jonathan Brewer | 4:07 PM ET | 03-20-2007

Talk of a potential bailout for homeowners who are in trouble has me livid, to say the least. As someone who consciously chose to rent as opposed to buying a house in a heated market that would have required me to take out a risky loan, I feel that any bailout is essentially subsidizing risk and stupidity. Why should I not be supported for my decision not to get in over my head and take out a risky mortgage? How is it possible to subsidize, via a bailout, the homeowners who are now in trouble without serving a grand slap in the face to those who were wise enough to sit out this bonanza?

Sent by Jonathan Halterman | 4:41 PM ET | 03-20-2007

I am flabbergasted to read here that there are still people in this country who are considering buying a home at this particular time.To those who are asking "how should I prepare?" Here's the standard wisdom: Save for a 20% downpayment on a home that is 2-3 X your yearly income.Ignore the corrupt realtors and lenders who would encourge you to do otherwise.This country is in for a massive devaluation of property values. Don't jump on that sinking ship.The mere suggestion of a bailout for indebted home buyers and unscrupulous lenders has me nearly appoplectic. These people all partied hard to get to the bad place they are now.I was smart enough to not go that party. I'm sure as heck not going to participate in the clean up.The only way to solve this problem is to let the market do it's thing now- prices go down to sane levels for incomes and people can once again buy safely and securely.Depending on where you live, "sane levels in line with incomes" probably means a big crash.Do the math. 2 -3 X income is the historical norm. I believe that before the 60's it was even lower than that. We could see 80% off in many areas just to get there.The bright spot is that homes will once again be truly affordable.My fondest wish is that Fannie and Freddie go down with the ship. All they've done is helped push prices up.Would NPR do a program about this organization? Why have they not been delisted from the NYSE? We need answers and information.

Sent by susan | 8:25 PM ET | 03-20-2007

The creative mortgages, for example 80/20 (5/1), are fine if you do have funds that you wish to keep invested in other areas. Providing the housing market doesn???t contract, refinancing in three to five years shouldn???t be a problem. Those without liquidity will find themselves owing more than the value of the home, a foreclosure in the making. Unfortunately, it is those anxious to be part of the American Dream, who tend to be the most vulnerable when signing home loan documents. It happens in all markets, whether it be purchasing an automobile or applying for a credit card. Due diligence is the key, but comprehending the voluminous amount of paperwork in buying a home is challenging even for the enlightened .

Sent by Wayne P. | 11:06 PM ET | 03-20-2007

We are just now beginning to look for our first home. Is this a good time to snag a good deal? I hate to put it that way.... but we are a couple who are waiting for housing to become more affordable. And we do not want to risk our financial future for something outside of our means.

We live in Los Angeles and simply want to make sure that we do not miss out on a more opportune time to buy a place. Is this it? Our will Congress step in to "fix" the situation?

Thanks for the help everyone. I wish I could have called in earlier today.

Sent by N. Fefferman | 11:28 PM ET | 03-20-2007

To Laura who thinks the problem is not the loans but the Fed raising interest rates:So, do you think the Fed should let inflation get completely out of control and the dollar get hammered just so these people who bought into an overinflated housing market using loans they didn't understand can sail on through while the rest of us get screwed?The Fed made one huge mistake: leaving interest rates so low for so long. They are now beginning to correct that. A little too late but better than never.BTW, a Bank of England chief admitted today that in order to avoid recession there in the early 2000's, they made a deliberate policy to turn the British people into debtors so that they could drive consumption up to keep the economy whirring.Sound familiar? How many Americans do you know who have been fueling their spending the past 10 years through debt rather than wage growth?Time for a major correction.

Sent by brenda | 1:54 AM ET | 03-21-2007

I was just 21 when I bought my house all on my own and felt on top of the world. In the four years I've owned it I've been layed off on five different occasions and twice been a day away from losing my house. I've had my first car reposessed and my once impressive credit now in the double digits. I stand back now at look at my little house and it's a sparkling gold mine. It's all I have and I can't loose grasp on it for it's the key to my future. I hear of so many others having this trouble when at a moment I thought it was just me, and unfortunatly it makes me feel so much better.

Sent by Ana C. Perez | 12:18 PM ET | 03-21-2007

I wonder about your "experts'" opinion that the collapse of the subprime market affects "everyone". As a renter in an overpriced housing market, I can't see how foreclosures of overpriced housing hurts me. I'm looking forward to foreclosures causing our ridiculous housing market to slow or collapse. While I don't expect our city to ever be affordable, it's a ludicrous market where an ordinary 2bd 1 bath house with a 1 car garage is sold for 1 million dollars. I hope every "flipper" who overreached themselves to make a profit, while inflating housing costs for the rest of us, lose their houses, their credit, and their ability to further inflate the housing market. I strongly feel that housing is a necessity, and too important to allow people to get rich with little effort. Anyone who is involved in that process, from lenders to buyers of sub-prime mortgages, deserve to lose their shirts. People who use real estate as a speculation, must expect to pay a price. The rest of us have had to pay for their profit for years.

As to those who live beyond their means buying houses just out of college or buying huge houses with "designer kitchens, they've contributed to the inflation of housing to the detriment of the rest of us. It's not a sin to rent, and that option is still open to most of those facing foreclosure. Ideally, a lower housing market would also lower rents, which is a win-win situation, not a catastrophe to be averted as your experts bemoan.

Sent by pat in California | 1:29 PM ET | 03-21-2007

I'm a mortgage professional in the subprime market. The most important thing a buyer should keep in mind is how much they can really afford along with the rest of their obligations and ask questions. Unfortunately, there are lenders/brokers out there who do not explain terms and risks fully.

There are subprime lenders out there that enforce regulations for their mortgage professionals; like where I work. Every loan we have here needs to pass a benefits test, which makes sure the borrower can pay back their mortgage and not over-extending themselves, otherwise the loan will not be approved.

The bottomline is, we shouldn't be overzealous, borrowers and lenders. Borrower's shouldn't take a loan that requires a payment that they know they're not comfortable with. Mortgage professionals should remember that borrowers are counting on you to guide them. Don't offer someone a loan you won't take yourself if you were in their shoes.

Sent by Sally | 4:36 PM ET | 03-22-2007

My broker/boss said he wanted to help me purchase my home. He ran our credit quoted rates and 4 months later after almost loosing the home I ended up cancelling the loans. I was then treatened with my job. The loan docs expired, the next day I recieved faxed confirmation from Title that the file was cancelled, nothing else could happen, no new title order open. The lender sent me confirmation of cancellation. Yet the loans went through anyways without my knoweledge. I was fired the next day. Since I was already living in property I was stuck. Now in suit with entities involved but attorney and I parted ways and now I may loose because of no representation. What kind of justic is it that I wont even get my day in court. It is not who is right or wrong but whom has the best attorney. We will loose everything like we havnt already.

Sent by Joan Adams | 10:54 AM ET | 03-26-2007

Don't give me this CRAP about "predator lendors" and stuff. There is no way you can tell me that someone taking out a loan for a $500,000 to $650,000 dollar house on an income of $70,000 is some type of victim. On just a basic level, they understood what is an ARM mortgage is. They are just trying to play the poor, innocent, I am hurt routine. So you interest-only fools jacked up the price of homes! Now you want me to bail you out of a $500,000 to $650,000 dollar house you can not afford? What about bailing people out of $100,000 car loans on Ferrari cars or $250,000 Yaht loans... NOPE, you took out the loans, your not innocent victims. As for the sub-prime investors that offered the mortgages, sorry, I don't feel like paying off your defaulting mortgage with a government(tax payer) mortgage... You gambled on high interest/high risk mortgages and now you want us to bail out your bad debt? NO NO NO...

Sent by Steven Beebe | 4:03 AM ET | 03-28-2007

I think the financial world has lost it's conscience. I think the Federal Reserve is a disgrace. Usury such as this is a sin.

Sent by Lois Davis | 2:07 AM ET | 05-27-2007

There should be more stringent requiements for ALL loans

Sent by Wayne Garrett | 1:35 PM ET | 01-12-2008

The Fed is buying its way out of an economic slowdown once again. I have no problem with that, but if the FOMC takes the Fed Funds Target Rate below 2.5%, then we can expect more asset bubbles in the near future. Fed Funds Futures are predicting another 50 basis point cut this time around, and the possibility of more cuts in coming months.

http://www.wsjprimerate.us/wsjprimerate/blog.htm

Sent by Steve Brown | 5:02 AM ET | 01-28-2008