Arizona Republican District 1 Representative Tom O'Halleran attributes crashing educational budgets to the mortgage crisis. Falling home prices cause less money to go to schools (property tax assessments). Only 9 out of 100 Arizona students who enter college graduate. O'Halleran claims Sedona, Arizona as his home town, and Sedona schools are among the best funded in the state. (The citizens always prioritize education.)

But can we really blame every bad thing that happens on sub-prime mortgages and adjustable interest rates? According to F. William Engdahl we haven't seen the half of it! The crux of the problem seems to be in the wholesale reselling of the mortgages. It goes something like this: 

• home buyer gets loan from mortgage broker
• specific lender is immaterial to buyer–rates and points count!
• lender sells mortgage to bigger bank
• bigger bank bundles good and bad mortgages together and sells them as bonds or pension funds or to private investors
• bundling and reselling as asset-back securities get sticky when the "bundles" quit paying off and someone decides to go after the asset to get their money back 

Because of the complex structure of asset-backed securities and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one is yet able to identify who precisely holds the physical mortgage document. Oops! A tiny legal detail our Wall Street Rocket Scientist derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMO’s in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States. --Engdahl

That's trillion with a T.

The significance of problem has already been proven by an Ohio court that ruled against a German bank's attempt to foreclose of 14 Ohio properties, because the bank couldn't produce the paper that proved they owned these 14 homes discreetly. What they own is a "bundle" which has been sliced up and offered to various investors.

I'll talk more about this as the weeks go by, because you know I believe in actually owning your home if you choose to buy one, neither getting stuck yourself with excessive mortgage interest charges, nor sticking your lender by not repaying the deal you signed up for - of which you may not have been aware.

Meanwhile, stay tuned for the adjustable rate reset tsunami coming to a town near you in January 2008.