Behind the U.S. Mortgage Mess

I thought this short article in the WSJ was a nice, quick synopsis of the U.S. mortgage mess. The graphic is pretty nice as well. Basically, the sequence of events was as follows:

As housing was booming, lenders made more subprime loans to unqualified borrowers (around 20% of mortgages were classified as subprime).

The subprime loans were securitized and sold to investors (many of which didn't understand the real risk inherent in the investment as the complexity behind them were hidden by how simply they were packaged up).

Delinquencies on these subprime loans remained low at first as home prices were rising. As home prices rose, borrowers were able to refinance their mortgages to continue to make payments.

As the housing market leveled off, delinquencies steadily increased. Rating agencies have been downgrading all these investments and investors have no one to sell them off to.

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