Person A goes to mortgage broker.

Broker tells A that housing pricing alway go up.

Broker tells A that Americans move on average every 5 years

Broker recommends A put zero down and get an interest only loan. Put the down-payment into stock...earn 10% (put it in WaMu! A safe, stable financial institution!)

Broker tells A to sell home in 5 years, pocket the appreciated value (5% a year in this market he gloats) and up size your lifestyle! Appreciated home value and 10% YOY profit in the market means bigger next home.

BTW: The interest only loan is floating...and whatever you *thought* you could afford... double it. Remember, always buy more house than you *think* you can afford.

Person A follows the brokers advice.

2 years later... rates have gone up. House values have gone down. WaMu is gone. A tries to refinance to a fixed rate... but the house value is so much less. A can't pay off the original loan... walks away.

Multiply this scenario a million times...

Oh... the company that buys these loans... they were told to loosen up the qualifying criteria...

Oh... and the mortgage is repackaged into a "secure" investiment instrument to mask the shady lending practices of the brokers.

Ok... so explain why we have a problem?

Funny thing is KRY is actually holding it's value pretty good!