Losses are spreading from sub prime to near prime and prime mortgages, commercial mortgages, and unsecured consumer credit (credit cards, auto loans, student loans).

Mortgages became more widely available.

What is needed is a quick write down of the value of the mortgages.

In the US, this crisis has seen over exuberant commercial real estate lending by regional banks.

One place to start is the tax deduction for interest payments on home mortgages.

Unlike virtually every other country, US residential mortgages are effectively no recourse loans.

Many banks have already acknowledged their open ended losses in residential mortgages.

This, of course, is just the story of subprime mortgages in another guise.

German banks grant mortgages only to a maximum of 60 of the value of a house, instead of the 100 mortgages that were frequently seen in the US and United Kingdom.

The growing gap between mortgage debts and house prices will continue to increase the rate of defaults.

Negative equity is significant because mortgages in the United States are generally no recourse loans.

For one out of four US mortgages, the debt exceeds the home s value.

The banks that originated mortgage loans sold their portfolios to investors who didn't really understand what they were buying.

The housing recession the worst in US history and worsening every day will eventually see house prices fall by more than 20 , with millions of Americans losing their homes.

The Right Weights for Mortgage Risks

Occupy the Mortgage Lenders

In the US, reviving the credit markets requires stopping the mortgage defaults driven by negative equity.

In the last years before the crisis, the flow of new mortgages had been 60 higher than the value of residential construction.

The main problem with US mortgage based securities is that they are non recourse. A CDO is a claim against a chain of claims that ends at US homeowners.

The fundamental question today is who monitors opaque loans, whether of the sub prime or any other variety.

The famous ninja (no income, no job and no assets) mortgage loans were as clear a sign of regulatory negligence as any.

So far, the sub prime crisis has had a limited direct impact on Latin America s mortgage markets.

But non prime borrowers about one third of US households do not have much access to mortgages and credit cards.

Securitization putting large numbers of mortgages together to be sold to pension funds and investors around the world worked only because there were rating agencies that were trusted to ensure that mortgage loans were given to people who would repay them.

We allow non banks to make home loans and let them offer creative, more affordable mortgages to prospective homeowners not well served by conventional lenders.

Rising house prices also allowed homeowners to refinance their mortgages, obtaining additional cash to spend on other things.

A true loss would be inflicted on a bank s creditors only if the write off losses on toxic mortgage loans exceeded the bank s equity.

Another 8 trillion are housing mortgages, which also carry little risk, given low loan to value ratios.

Mortgage debts, too, must be written down.

So they've created deductions, subsidies and insurances.

America s mortgage market remains on life support the government now underwrites more than 90 of all mortgages, and President Barack Obama s administration has not even proposed a new system that would ensure responsible lending at competitive terms.

Mortgage brokers were happy to get in on the act.

It was called securitized mortgages.

Credit card, electronic wallets, mortgage back security stock options.

But this assumption was shattered when a broad based decline in real estate prices began in 2007 and loss rates on mortgages suddenly increased. As a result, RMBS were found to be much riskier than anticipated.

The Treasury has asked for authority to purchase 700 billion of mortgages to get them off of the private sector's books.

Indeed, subprime mortgage lending delivered illusory wealth increases to Americans at a time when they were suffering from stagnant or falling real wages.

After the subprime crisis erupted, mortgage and consumer debt was paid down by households either with their savings or by default.

What started as a problem with sub prime mortgages has now spread to houses more generally, as well as to other asset classes.

The stock market dropped sharply. Home prices fell 40 , completely wiping out the equity of one third of all homeowners with mortgages.

When that bubble collapses, it will hit not just the weaker countries the equivalent of sub prime mortgages but also stronger creditors.

Total financial losses including possibly 1 trillion in mortgages and related securitized products could be as high as 1.7 trillion.

Who wouldn t want credit markets to serve the cause of home ownership? So we start by introducing some real competition into the mortgage lending business.

Indeed, the foreclosure rate is increasing.

The problem was not just sub prime mortgages.