Sub Prime Lending Market Woes

A disaster has been brewing in the sub prime lending housing loan market for some time. Until recently there was optimism that the damage could be contained.

However, with the recent Bear Stearns hedge fund disaster it appears like the toxic circle of debt supporting more poorly collateralized debt is going to lead to some very unpleasant worldwide repercussions.

The entire lending industry has been drastically effected by the Alan Greenspan lead Federal Reserve liquidity explosion of the past several years. While Greenspan is no longer Chairman of the Federal Reserve his legacy of creating a true US Dollar fiat currency and easy money will be with us for a very long time.

For the past many years lenders seemed to forget that when you lead to people who have a very limited ability to repay trouble is sure to follow.

Trouble is for sure brewing now as a record number of homes are headed for foreclosure. As ARMs , Adjustable Rate Mortgages, are reset at much higher interest rates with the resulting much higher monthly payments, an army of borrowers are finding it difficult, if not impossible to replay their loans.

Look for much higher interest rates over the next couple of years as credit worthiness once again becomes a major concern for leaders.

For addition articles on credit markets and on investments in today’s dangerous environment visit our sister site Investment World Today.

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