So, like our glorious leader who likes to borrow outrageous amounts of money that the US does not have, many people have bought homes with money they do not and never will have either. These are people with less than grreat credit who borrowed in the only way they could....and guess what happened when they followed the examples set by our leader....Well, let us look at Novastar Financial - ticker NFI. Today they were down $7.46 to close at $10.10 - down 42%...OUCH! That's gonna leave a mark! It gets worse....
http://finance.yahoo.com/q/bc?s=NFI&t=3m&l=on&z=m&q=l&c=http://chart.finance.yahoo.com/c/3m/n/nfiYep - the stock was $30 three months ago....So, these people are defaulting on their mortgages and the mortgage company is getting crushed too.
Many other subprime lenders are feeling the heat too. RESCAP, the mortgage arm of GM has seen insurance on its own debt get more expensive with great volatility suggesting they too could see trouble - this in an environment where such insurance is almost universally getting cheaper - the insurance is called a credit default swap or CDS.
People need to learn not to follow our leaders - they have set terrible examples. The strength of our economy is partly held up by real estate. So, there is reason to worry - but not too much just yet - the mortgages that are not subprime are still strong, but the first kink the armor has exposed itself.
This borrowing frenzy we are in is simply unsustainable.