"SUB PRIME" LENDING WOES AND BUSH MEDIOCRITY

Been there done that. And once again the mediocrity of Bush cabinet appointments will rear its ugly head. The first time a real estate problem happened for me was back in the 70s when I was astounded at the number of normally reliable homeowners who simply walked away from homes that went "belly up," meaning their mortgages were much higher than the underlying value of the property. As this was happening manyjust stopped paying their mortgage payments and moved out. That's when the term "Non Recourse" became the life saver for homeowners unable to pay. Pretty soon the unable turned out to be the unwilling, unwilling to make payments pegged to a home worth $200,000 that suddenly was worth only $150,000. The hit was major and the S&L scandal was born. Lenders "solved" the problem "next time" by demanding 20% down in the future. That made Wall Street and everybody else sort of happy. The latest collapse is happening in large part because flakes without the 20% up front cash managed to "float a second," meaning they came up with much of the 20% downstroke by borrowing it in a "sub prime" (high interest high risk) market. The second mortgage is a recourse loan, meaning that other assets can be seized to pay the debt. Once again Bush appointees have sat on their asses for at least two years while this scenario of bad credit risks borrowing at "floating rates" was being written, unwilling to take charge. How will this work out? Cold be very serious if the consumer is forced out of the market by a combination of prohibitively higher insurance rates and the lack of liquidity in the banking system. Stay tuned. Once again, thanx George.