The current credit market dislocation has eroded value in real assets across all asset classes principally due to the fact that the structured debt and hybrid products available then were the primary driver of values

The secondary mortgage market facilitated mortgage originations with investors who purchased yields as investments

Residential mortgages were originated in the primary market as home buyers obtained loans from banks, Federal Credit Union’s or other financial institutions to include insurance companies

Most lenders after closing “pooled” the loans they originated and sold these pools in the secondary mortgage market in order to recapture their funds to relend them out again, starting the process over. This was very profitable to these entities as they charged large fees that generated additional income.
Traditional types of mortgage loans, fixed and adjustable rate mortgages, were sold to investors until the supply of loans decreased, inducing the imbalance in the market; under supply and over demand for paper

Because of this demand, pressure was placed on Wall Street to increase supply, and the lending industry responded by expanding the rules to include what was traditionally non-qualifying borrowers.

From this pressure, the subprime market was created to include exotic and hybrid loans such as negative amortized, stated income and stated asset non-conforming loans.

These too were pooled and sold to investors such as pension funds eager for more product and greater yields, which were then repackaged and resold as mortgage backed securities (MBS) to larger institutions

Overleveraged homes where the asset value is less than the mortgage owed

Credit markets continue to remain dysfunctional, causing the real estate market to remain depressed

Economic downturn in the U.S. is forcing pay cuts and unprecedented increases in unemployment

Lenders have many toxic assets on their books, forcing many banks into insolvency, bankruptcy and eventual governmental FDIC takeover