House of Cards Summary and Critique

One major factor in last week's stock market drop is the concern that the subprime mortgage market's problems will spread.
Several subprime lenders have shut down or experienced plumating stocks. Real estate prices have dropped with a free fall appreciation rate.
Easy money was the weak foundation built for the housing boom. The Federal Reserve cut interest rates as a response to the 2001 recession.
Rising home prices and cheap money increased demand and pushed home prices higher. The demand by investors for mortgage backed securities was another major factor that created a credit bubble.
Loans are standard practice that are given to borrowers with unstable credit history, no down payment, and no income verification. It is estimated that one in five subprime loans given in the past two years will end in foreclosure.
Risky lending practices began in the Alt-A-Market which is between subprime and prime borrowers. With a combined rate from consumer markets and Alt-A loans, 40% of 2006 mortgages were risky.
An immediate increase in demand promoted by unstable mortgages was key in the increase of home prices. It presently costs half as much to rent as to own which proves the market price of real estate is disconnected with its value.
Banks are beginning to tightentheir underwriting standards as well as lending standards. Due to pressure from Congress, they are tightening standards on subprime loans.
The demand for housing will be reduced when risky loans are hard to get and credit conditions are tightened. The boom of real estate is how reversing and is becoming "vicious" with increased foreclosures, lower home prices, etc.
The worst of the "housing slump" is believed to be ahead of us. The big issue is how decreasing home prices and increasing "delinquencies" will affect and possibly destroy economic growth.
As foreclosures increase, questions of blame and questios of possible solutions arise.
Politicians won't blame consumers but those speculators, borrowers, and exchangers knew they were taking a risk.
Risks of these loan products are often misrepresented. The mortgage brokers, banks, and Wall Street firms who "securitized" credit rating agencies and mortgages that increased their worthiness of credit will make obvious political targets.
However, Congress's hands are tied because they can't do much without worsening the problem. If Congress tries to help consumers out, they may worsen the problem by saving incentives such as lowering your mortgage payment. If the "bailout" is more about rebuilding debt it could bring down te downturn. Allowing consumers to go bankrupt and have a new beginning would probably have been a better solution.
When the Federal Reserve cut rates for extra cusion for the economy as a result, we are suffering from housing problems and mortgage markets. Home prices and financial distress will continue if consumers continue to take out risky loans.

Critique:
Laperriere does an exceptional job of explainging how risky loans are fueling economic instability and the housing boom. He thoroughly goes in-depth about every aspect of credit policies, mortgages, and payment options. The only thing I did not like about this article was the vocabulary. The vocabulary used was very difficult to comprehend. I wished he would have used smaller, easier words to explain risky loans and all that comes with it. I have had little experience and exposure to the topics he discusses and often found myself stumbling over several words and concepts.