“Countrywide” Redux:  The Age of  the Sovereign Sub-Prime Loan

Remember sub-prime loans, the ones being handed out like candy to apparently penniless Southern Californians (and Nevadans and Floridians and . . )?

With such features as “negative amortization,” whereby the Buyer could opt to re-pay as little per month (or nothing!) as they wished, with the shortfall simply being added to the outstanding balance?  (thus, the name “negative” amortization, vs. the good positive kind, whereby you gradually owe less over time).

Cue . . . Today

People correctly understand that such loans have long since disappeared from the private market — surprise, surprise, not too many takers these days for Wall Street-designed, Triple A-rated “pigs-in-a-poke” securities.

What’s less obvious — perhaps because the numbers are so mind-boggling — is the extent to which the sub-prime shenanigans have moved on to the public (sovereign) debt market.

At least as I understand it, countries like Greece, Ireland, Portugal, Spain and next perhaps Italy, are the new subprime borrowers — all of whom are essentially on the receiving end of a (cumulatively) multi-trillion dollar line of credit, with the unpaid monthly installments simply being added to the bill.

Countrywide . . . indeed.

P.S.:  The only saving grace?

The lenders are other sovereigns, not voracious credit card companies (still) charging 20%-plus interest in an environment of zero percent (wholesale) rates.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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