The worst market crisis in 60 years: George Soros

For those of you who were around during the Thai Bhat crisis of the '90's, the Dot-Com implosing of the turn-of-the-century, and the utter financial pandemonium that followed 9/11 and you're thinking there's something uniquely troubling about this current "Sub-Prime Mortgage" triggered financial upheaval, you're not alone.

None other than George Soros is calling our current situation "the worst market crisis in 60 years".

Pretty much he seems to be saying that some of the financial instruments that have been invented in the past 20 years or so are hopelessly too risky.

Actually, I got to thinking about that myself back when I got MY mortgage.

All of the research I did seemed to indicate that the only way you could get a "normal" mortgage was to make a 20% downpayment.

I found myself wondering why this was. Partially I wondered why it was 20% instead of 50% or 5%. But of course also I was wondering why you needed a downpayment at all.

Some of the opinion pieces I read said that, "If you have 20% of your own money in the house, you're more likely to try to stay in it."

Well, maybe.

I really got to thinking there must be a more concrete answer than that.

A mortgage, hypothetically, is supposed to be backed by the property its buying. With real estate prices generally having gone up over the long run, one might think that appreciation would cover the risk of default in a mortgage.

Turns out not.

Although I never did find the exact historical evidence for this, I got to thinking that the reason you need a 20% downpayment to get a "conventional" mortgage is that at any given moment the housing market is susceptible to sudden, unpredictable 20% dives and if the banks don't have a 20% aggregate downpayment THEY are subject to a '20's-type domino-style collapse and that is JUST what we are seeing.

Yes ... this one is going to be ugly ... way ugly ...