How is the sub-prime mortgage crisis affecting the economy?
The sub-prime mortgage crisis is affecting the economy in major ways. What was happening was, people in the past who would not have gotten mortgages and not been able to buy homes did get mortgages in the early 2000's. And not only did they get mortgages but they got them at below market interest rates, they were getting two and three and four percent that would then adjust up to the market in two or three or four years. And that's what's happening now, is these resets are happening and people are not able to make these higher payments and therefore they're losing their homes. And there's a tremendous amount of delinquency and foreclosure going on in the housing market. That not only affects the people who are getting foreclosed upon and losing their homes, but if the value of their homes are falling it can mean the entire neighbourhood can go down. So you're seeing entire neighbourhoods with the value of homes that is falling, not from people necessarily selling but because of foreclosures and delinquencies going on. This has a big overall affect on the economy. When sub-prime mortgages are going down or having a lot of delinquencies and foreclosures this affects the mortgage-backed securities that these are part of. So you've seen tremendous turmoil on Wall Street where the value of these mortgage-backed securities has fallen very dramatically causing huge write-offs by the banks of the value of these mortgage backed securities. So the sub-prime mortgage crisis is big and unfortunately it's getting bigger all the time.
