During the Go-Go years of mortgages (and other financial transactions) there were almost as many variations of mortgages as there were borrowers. Included in these mortgage loans were stated income loans, sub-prime loans, 100% loans, no doc loans including no doc jumbo loans, government guaranteed FHA loans with no credit score requirements, 80/20 mortgages, 80/10/10 mortgages, FHA loans allowing a third party seller-funded down payment loans so the borrower received a 100% loan, stated W-2 loans, and even stated income rental property loans. These loans were not all sub-prime loans. Many were called "Alt-A" mortgage loans where the borrower had really good credit but didn't need much documentation.

So just what happened? There are many recounts of the crash of the housing and mortgage markets and in particular the sub-prime mortgage business. A lot of them are more detailed than I could provide here but I will attempt to provide a layman's explanation of the crash.

I believe that one simple word can describe the crash. This word is greed, particularly by Wall Street and the lenders. And yes, even us home owners pushed the envelope by acquiring loans that we shouldn't have made and we are reminded about it almost daily by ever-wise media. I'm sure they never made a mistake like a certain network that practically kissed the ground the ex-Fed Chairman walked on. Many gurus now believe his desire to avoid a natural downturn was the biggest reason of the real estate bubble. And let's not forget our illustrious Congress's push to have every family in America own a home, whether they could afford it or not. So you see, there was plenty of blame to go around and all of these participants based their contribution on the premise that house prices always go up.

Well, surprise, surprise, every bubble eventually bursts and the initial prick that burst this housing bubble was default on sub-prime loans. The reason for this is that most sub-prime loan borrowers were the closest to the financial edge. Following these loans in defaults were the Alt-A loans. As more and more borrowers defaulted, mortgage lenders started tightening their lending requirements. Mortgage lending rules changed daily or even multiple times a day.

As a result, two things happened. First an ever-increasing amount of distressed sale homes started showing up in the market. This grew the inventory of homes and because of the distressed nature of the sale, drug down other property values. The second was that as a result of the much tighter mortgage requirements, less and less people could qualify to purchase a home. This meant less demand. So 101 economics tells us, when you have a combination or lower demand and higher supply you end up with lower and lower home prices. Unfortunately, this situation will take some time to work through the system despite all the government and Wall Street rhetoric. But, maybe I'm wrong. Time will tell..

So the net effect is all of the no doc jumbo loans and stated income mortgage loans were casualties of the significantly tighter lending standards. The one exception is a rare few private stated income loans, even no doc jumbo loans and of course owner financing where the seller often will sell private mortgage to a mortgage buyer to get their cash. I guess there will always be a few hardy entrepreneurs filling a void left in the market. It's the way of the business world.