The Subprime Crisis.

While it is true that rates of home ownership have risen to record levels over the last couple of years, it is also true that there has been a worrying rise in the number of late mortgage payments and foreclosures. This troublesome trend, precipitated in large measure by the anticipated failure of several so-called subprime lenders, worries many analysts who follow the housing market, and worries have grown that the trouble in the housing sector could spread to other areas of the market.

So far at least much of the problem seems to be confined to the subprime mortgage market, where many lenders found creative financing solutions for home buyers who otherwise would not have been able to qualify for a mortgage. While this creative financing, including no money down loans, interest only loans and even negative amortization loans did help get buyers into homes, it also helped to create an untenable situation for the future.

The low monthly payments that home buyers were able to enjoy came at a price, and much of that bill is now coming due. As interest rates adjust and interest only mortgages revert to traditional payment schedules, more and more homeowners are finding themselves unable to afford their mortgage payments. This has in turn led to an increasing number of foreclosures and distress sales.