Fiat Lux

I'll be the first to admit that I'm not a real estate expert. But when browsing through the online WSJ today, I was struck by some of the data in their article about the 'subprime' mortgage market. Here's a few tidbits:

- At least 20 subprime mortgage lending companies have either closed, been sold, and/or filed for bankruptcy.
- Almost 1.2 million foreclosure filings were reported in 2006, a 42% increase from 2005. That is a rate of one per every 92 US households.
- "Creative" subprime loans (such as interest-only and no-doc aka 'liar' loans) accounted for 47% of total loans issued in 2006. At the start of the decade, these types of loans were less than 2% of total mortgage loans.

As I said, I'm not an expert, but none of that looks like particularly good news to me. Even Ben Bernanke is starting to mention it as a possible concern.

One thing does make me wonder, though -- this article seems to be treating the market as if each of these mortgages were acquired by individual households. Yet it's also true that this recent real estate boom included a lot of speculation, and at least some of that speculation was financed via these same exotic subprime mortgages. (Casey Serin is a good example; he used a number of different subprime mortgages to unsuccessfully speculate on at least 6 properties). So -- my question is -- is the impact really going to be as broad as this article suggests, or will it be more localized?

I have no desire at all to ride out another recession so soon after that last one, so my hope is that things don't turn out as badly as they could. Whether I'm indulging in wishful thinking or not ... well, we'll see.