Metropolis Opinion

“Lack of funding is the biggest problem facing the housing market right now, according to the analysts, with subprime and Alt-A securitized markets shutting down and banks being forced to cut their mortgage lending dramatically due to capital constraints. So-called Alt-A loans are made to borrowers with less than prime credit ratings but who are above subprime.”

The highlight is taken from Reuters News Mail letter.

My previously posting on Jacky’s Opinion, Job losses in America; one of multiplier effect from Subprime Mortgages in America, I have told about economic theory explain the case with simple assumption, Constant Oil Crude Price and Businessmen take Capital From Loan.

Actually this post is quite well the same with my post in Jacky’s Opinion, but we focus on Loan, Bank, Mortgage and Economic Crisis. After Subprime attacked Banks and Property Investors, Banks have already been booked (yellow flag), more careful to accept new loans. The complication goes to worst because the multiplier effects are spread any sectors.

In this case, Property Businessmen and their lenders (Funding Banks) will get both negative impact because of Subprime Mortgages. While they are trouble, House Pricing is being declined.

Interest Rate is the indicator from those complications; Banks raised their Interest higher than Subprime rate. Both Banks and Borrowers have been attacked and suffered. Banks have loss and they have no money to continue their life, distribute loans to borrowers. Banks also get poor reputation from FED; entering them to blacklist. Borrowers’ Loans will raised because of interest rate, poor or bad credit will listed on their company (personal), If they have lost their Ability to payback their loans (we assumption that their business also loss), they are in Jail soon, staff, unemployment will run high and macroeconomic will decline.