The appetite to own property from those who are less credit worthy hasn't abated. The appetite to make these loans hasn't either. The industry will continue but changes will be made and in years to come I believe we will be close to where we were with programs, loans to value and credit scores.

I could go on with facts, figures and stories about sub-prime which is an area my Company has worked in for the last decade producing about 3/4 of a billion dollars of these loans. We have accomplished some extraordinary results including the one I am about to relay to you. For the past six months a gentleman has been trying to refinance his house which he is buying from his wife, with her blessing, because they are divorcing. For six months we have tried to get her to sign the deed and for one reason or another she wouldn't do it. When we started his new loan was in the six percent range and his credit score was about 620. Two weeks ago the deal was finally consummated but because she didn't pay the credit cards assigned to her, his credit dropped to 500 (one more point and the deal was dead).

His rate jumped to the high 8% range and the loan closed this week. If she had waited one more week the loan couldn't have been made because his credit score is now too low.

I hope this gives you another view of the sub-prime market which certainly had it's problems, but nothing compared to what might be the iceberg that sinks home lending or at least curtails an industry that is most vital to the economies health. It is the Option Arm which allows you to pay less than interest due each month and let the difference accrue to your balance. Instead of your balance going down it goes up and when it reaches a predetermined percentage (110% or 120% of the original loan amount) you then must pay both principal and interest. Your payment could double or triple, your equity is gone and your option then is foreclosure or deeding the property back to the lender.

I have talked negatively about this loan for years and now one of the nations largest lenders has a reported 5% delinquency rate on their portfolio. If real estate prices fall, which we really haven't experienced to a major extent, the aforementioned delinquencies could double and the economy could be in serious trouble.

I hear nothing about curtailing this type of loan from any of the lenders who specialize in these. While Rome burns, the prime lending institute is still selling matches! Why?

I will give you a hint. The word begins with a G.