Sunday, September 2, 2007

Mopping up the mortgage mess

The mortgage meltdown has been like a ticking time bomb that went off, scattering debris more and more widely.

So it was a welcome if overdue step when President Bush finally spoke out Friday about the subprime mortgage crisis that has rippled throughout the real estate market, financial markets and broader economy.

The current crisis is due in large part to borrowers who over-stretched financially or gambled on ever-rising home prices and to greedy lenders pushing exotic, risky mortgages.

Add in some lax regulatory oversight and the increased risks and loss of accountability as mortgages are bought and sold like pork belly futures, and there's plenty of blame to go around.

And the worst is yet to come. More than 2 million subprime adjustable rate mortgages (ARMs) will reset at higher interest rates in 2007 and 2008, with $50 billion worth of ARMs due to reset in October alone, according to Nearly 500,000 Californians will lose their homes because of subprime loans originated since 1998, forecasts the Center for Responsible Lending.

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