So anyone watching the news lately? Seems like the "subprime" mortgage meltdown isn't exactly what it turns out to be. For weeks, the story has been something like this (paraphrasing):

" The evil REALTORS in cahoots with the greedy lenders took advantage of the doe-eyed consumers who didn't know any better and tricked them into deceptive loans that had teaser-rates that are suddenly snapping up to sky-high levels that the poor homeowner can't afford any more - and he can't refinance because his property value has dropped. The perfect storm!"

Of course, the mortgage industry, in it's infinite wisdom accepts this media-fable with it's "compassionate reaction" something like (paraphrashing):

" We're really not greedy and evil! We care about consumers! We'll even come up with some crazy schemes to bail-out these borrowers because they didn't know how to read the fine print on our contracts. Oh, please, Congress, don't come after us with a big stick! We'll bend over backwards and damn our investors - anything you ask - just don't re-regulate us into oblivion!"

And the REALTORS? Here's their take:

"Oh, woe! The contracting of the easy-money-market has made it impossible for us to price homes properly or find qualified prime-grade buyers who want to make a sensible investment! We don't know how to sell homes unless people who aren't lining up at the front door with a bid in a hyperinflated market. It's the lenders' faults! They made all those bad loans to buyers who can't pay and now can't even live in the houses we sold them two years ago. No wonder nobody will give me any referrals.... Guess I'll just have to keep running expensive newspaper ads because the internet leads I get from my broker don't want to overpay for overpriced property any more...... Waaah!"

And then slowly, silently, through all the mud and sobs and handwringing, comes Big Brother, with his cleverness (again, paraphrasing):

" Congress shall pass a law requiring lenders to provide financial advice to borrowers before they offer them a loan. Plus we'll throw any lender in jail if we think he was acting in a predatory fashion by lending to someone who can't pay it back now (and who cares if we don't have a definition of "predatory". We're the government, we'll make it up as we go along with the help of our trial lawyer friends). And we'll just ignore the empirical data from Illinois where they already did this in one suburb of Chicago a few years ago and no lender will now lend on any property in that market, so house values have plummeted and nobody can buy or sell - and all those "poor people" are now even poorer.... but there's always a public taxpayer bailout to consider!"

Not to mention the stunning intellectual capacity of our presidential candidates, who are making brownie points from the mess, and offering supply-and-demand-destroying ideas like (more paraphrasing):

" We suggest we freeze all subprime mortgageBear-Stearns-Troubles Nov-07 rates at their current level. We don't have a definition of who is really subprime or who should be eligible; just anyone who can't pay, or doesn't want to pay, or has lost their job or is just depressed. Freeze the interest rates - the market be damned! Who cares if some investors go belly-up as a result, and foreign money stops pouring into our economy! All those rich people at home and abroad can afford to lose a few dollars as long as we keep the poor homeowner from becoming homeless!"

And then: Wham. Reality. The REAL STORY. The part NOBODY has talked about until just the last couple of days. The FACTS. Not the whining or the sob-story. The facts that point out that the subprime mess a) isn't a "poor" story and b) wasn't any lenders' fault and c) doesn't need Congress or presidential candidates or even lenders or realtors to do anything except let the market do it's work. Oh, sorry - here are a few FACTS:

First, the MAJORITY of people who are in this mess ARE NOT "sub prime" borrowers.

According to the Wall Street Journal (http://online.wsj.com/article/SB119662974358911035.html?mod=sphere_ts)

An analysis for The Wall Street Journal of more than $2.5 trillion in subprime loans made since 2000 shows that as the number of subprime loans mushroomed, an increasing proportion of them went to people with credit scores high enough to often qualify for conventional loans with far better terms. In 2005, the peak year of the subprime boom, the study says that borrowers with such credit scores got more than half -- 55% -- of all subprime mortgages that were ultimately packaged into securities for sale to investors, as most subprime loans are. The study by First American LoanPerformance, a San Francisco research firm, says the proportion rose even higher by the end of 2006, to 61%. The figure was just 41% in 2000, according to the study. Even a significant number of borrowers with top-notch credit signed up for expensive subprime loans, the firm's analysis found.  [Empasis added]

So, who is the "subprime" borrower? A buyer who wanted to live beyond his means, in a house beyond his ability to pay anything on the principle. An interest-only-loan borrower who misjudged the market and thought that housing appreciation would only go up. In other words: They were speculators. And just like the classic gold rush, some people get burned when they speculate in markets they don't understand.

Ok, the article also suggests that some lenders "pushed" these loans on people, by marketing them aggressively and making them easier to qualify for with no documentation or income verifications. But wait just a damned minute: how come EVERYBODY isn't in trouble then? Why did some people buy within their means? Why didn't everyone overbuy? You can answer that for yourself - pick a variety of moral, financial or simply generational reasons. You don't need me to answer.

Fact is: No lender "forced" a buyer to sign a loan - whether they were superbly qualified for it or just wanted it because they could live in (aka, rent, which is what you do with interest-only loans) a mansion for a few years. And lenders are paying the price for their own stupidity: just ask Countrywide or, for that matter, any number of lenders and brokers who have closed up shop in the last year. They made bad loans and they are paying the price along with the bad borrowers. The market's justice is equal and evenhanded.

Fact is: You can't freeze mortgage rates, even for a day. Lenders don't have cash on hand; they can't just shift the pile around or make it a little smaller to sit on. They invest their mortgage notes in securitized pools - it's not like this is the Middle Ages where lenders dole out "real" money and get "real" money back. They play the "spread" between what they lend, what they can invest with the assets and earn a return, and the difference in between. Mortgage lenders can't just "stop" getting paid by the borrowers - at all or at a higher rate - because that's how they invested (ie., priced the loan) in the first place. They priced it in order to make a return after the rate increased. And let's stop calling introductory rates "teasers" because nobody was "teased" for three years or five years in their mortgage. It's an ADJUSTABLE RATE mortgage. And, like the name says, it ADJUSTS at a certain point. Which isn't hard to guess: The adjustment date is right there on the contract that the buyer signs!

Fact is: The REALTORS could be helping much more in this process, too. Now, let's put to rest the idea that they should have "discouraged" over-buying on the part of their buyers in the last few years: if you want to run an industry on commissions, then you have to understand that it's in the REALTOR's best interest to get the highest amount of money on the table (for either party, really). Not to mention that Big Brother keeps pushing the REALTORS to "find ways to put "subprime buyers" into homes" and all that kinda blather...

But that doesn't mean REALTORS can't take the high ground here. The first thing they can do is stop pushing for more regulation of the lender market. Gosh, what a damned foolish idea that is - get MORE government interference? We don't want to look like we're "twisting that knife" in the back of the lenders, now, do we? How about something smarter? Any of these ideas might work:

-- How about attacking the subprime market by doing better work with your buyers. Like showing them DAYS ON MARKET which helps them understand proper pricing and offer strategies? Of course, that would be counter-intuitive to some MLS's that have recently removed the days on market function from their public data display.

-- How about developing a financial planning worksheet that agents can use with buyers that goes beyond the "are you preapproved" stuff. Instead, work with buyers to understand what it will be like to live in and pay the monthlybills in their next home by creating a real budget with them.

-- How about putting some financial planning and investing information on our websites? When was the last time you saw anything more than a rudimentary mortgage calculator on a broker's page? Maybe we could use some better tech tools on the page to explain how loans work and how they can affect your home ownership experience. If we're really about home ownership, and not just home transactions, then let's start acting like it. Want to generate referrals?

-- Then how about doing more seller workshops - not just buyer workshops - that teach your potential future sellers a few rudimentary concepts such as absorption rates, days on market, competetive positioning and oh, say, supply-and-demand? Teach them to forget about their house as a "home" and put aside their old memories: and start thinking of their home as a comparative commodity in a market that's (currently more but always some ) full of lots of alternatives to their offering.

-- Of course, that means using data to price homes. Not emotions. Let's not forget that brokers are also getting the fall-out from the subprime mess: Lenders and borrowers may be in trouble, but so, too, are brokers who are stuck with tons of overpriced inventory from sellers who can't sell under certain thresholds because they don't have any equity. Which means brokers need to use data to price homes better - if not to resolve today's crisis, but to avoid recreating it again in the future from those sales they can still put together today.

So, that's the real story about the subprime mess. Don't expect anyone to believe it though - especially with Mr Genius the President today announcing he's ready to freeze the market, suspend the laws of supply and demand and generally accept a country-wide recession (as investment flees the US markets and lending collapses). Of course, it's all in the name of "the children" or some such political expediency. Too bad nobody asked how their "subprime" parents are going to pay even "frozen" mortgage rates when the rest of the economy goes right down the drain.

Cheery stuff, huh?