Some of the biggest mortgage lenders in the US are reportedly in trouble and the fault really lies with the sub-prime market and how some well-respected companies became embroiled in this market.Competition for lending in this end of the market had driven lenders to offer mortgages beyond the grasp of those who borrowed just to get names on accounts and show a rising business. One can only guess that they believed that rising property prices would mean that the lender was not going to lose out, either that or they just didn't care...
These sub-prime lenders showing healthy-looking lists of accounts were snapped up by bigger institutions such as Fanny Mae and Freddie Mac. In retrospect, we all now know that was a big mistake as those balance sheets did not tell the real story.
These big institutions could now pay a big price and the bad news is that other big banks could also be fatally wounded as the markets collapse across the world. This is not to say that home owners with mortgages need worry about problems with their lender, the worst hit will be those who may struggle to pay their mortgage regardless of the lender.
Popular Questions:
Will we all end up broke?
How long will the credit crunch last?
Sub-prime mortgages to blame?
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