Coffeeville Lake Topics: Subprime

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	Name:	John C -
	Subject:	Subprime
	Date:	7/25/2007 3:26:03 PM

I don't think that the subprime mortgage fiasco will affect the lake at all, or at least in any meaningful amount. Most buyers are higher end folks that are putting a large cash portion down and / or using (what I deem to be) banks or mortgage brokers that are not sub prime players.

What small effect there may be would be the proverbial heir to a lake house that granny bought in the 60s. She wills it to her two grandkids, who take out a big subprime, heloc, ARM, or some such other exotic loan. In 2 years the payments are raised by rate increases or whatever, and the two heirs can't make the payments, so they sell. But that is merely hastening what often happens anyway.

If you meant what will be the effect of the subprime fiasco nationally, who knows? I think the first effect will be bank shareholders having to scrutinize their banks' involvement in so called subprime lending. Because stockholders always want great returns, but they also want no risk. Risk / return are usually inversely related. So if banks want return they must make some risky loans. I think it's up to shareholders to evaluate that risk and make their own decisions. I don't think more government intervention is the answer. It seems to me that many banks are seeking to chase the returns, but corralling the risk by buying subprime players and leaving them in their own pastures, a la Wachovia buying Golden West.

But, this is not my area of expertise. Anybody wishing to learn more should read the articles on wsj.com, and search for subprime. They have really good coverage.

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