The Subprime mortgage loan originators have been having a set of real problems for the last few months as the value of homes they have loaned money to buy drops. This is a direct result of the housing bubble, which burst last Summer, and the nunmber of highly risky loans used to buy many of those homes.
Go read Bonddad's excellent description here.
Everyone has known this was coming since at least 2004 when then Federal Reserve Chairman Greenspan told people to use any loans they could get to buy real estate. The fact is, real estate building and sales have been the mainstay of the American economy since 2002. It was beginning to slow down, and Greenspan knew that only real estate-related business activity could keep the economy going.
The assumption was that the rest of the economy would pick up before the bottom fell out. Only that hasn't happened.
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