How Bad is the Sub Prime Mortgage Mess? When you look at the numbers, that is.
Every banking crisis we have ever experienced has its roots in the unchecked explosion of credit, this occurs without regard to people's ability to pay off the debt or a reasonable risk assessment. Lately we hear about how the poorly administered loans in the subprime mortgage mess has cripled many credit markets in the United States. Well, I'm not so convinced that these bad loans are the culprit. Maybe they are just a convenient target. After all, the public always wants to find a bad guy to blame. According to the Federal Reserve, only 14% of the total mortgage market is categorized as subprime. So what do the numbers actually tell us? How many defaulted mortgages are there truly? How many more mortgages should we expect to default? It's really some simple accounting. The article written by former hedge fund manager and Wall Street analyst, Tom Brown maps the data out logically. He calculates a loss rate that tells us what % of the mortgages out there will default. He l