Post September 11, 2001 the subprime mortgage idea resurfaced to slow the downturn in our economy.  In a nutshell, the mortgage industry initiated and created the “pipeline” of subprime mortgages from 2002 till recently. The first short sales/foreclosure surfaced about 2007. That equates to a 5 year “pipeline”.  On a linear scale that would mean we have until 2012 to digest all the subprime originations.

However, subprime mortgages reset to fully indexed values at 125% of the original value of the loan. With home prices losing value and subprime mortgages increasing in principal- it is evident that the real estate idustry has a problem. I expect to see many homes going to foreclosure in the coming 12 to 18 months.  Consequently, this will have a negative effect on the entire economy.  Unfortunately, there is no quick fix- it is time to take responsibility for the loose underwriting that supposedly saved us from an economic downturn…

For a more in depth explanantion, please visit Wikipedia .

Commercial MasterMinds               Consult Pete