Subprime problem

9/12/2007

In the old days you were required to come up with a down payment of 20% to buy a house. Then the smart people at mortgage insurance (MI) companies figured out a way to avoid the 20% down rule. They would let you put less money down but make you pay for their insurance on you in case you default. Pretty smart, you pay their policy on you.
Now the sub prime people do not require mortgage insurance and this is why their are so many companies losing so much money in the "sub prime mess."
There is no one to blame and no insurance to cover the losses. What you will see in the future is that if any sub prime lenders are left--right now most of them have LTV's capped at 80%, duh, 20% down payment required again--they will have MI.
MI is expensive but relative. So, once again the people with the lowest credit scores will continue to pay the most money for homes.
With so much emphasis on credit--it's your Adult Report Card--then why don't we educate our young ones better?