If you have money in a pension fund, chances are some of that cash is invested in something called mortgage-backed securities. These are mortgages packed into bonds that are then bought and traded on Wall Street. One of the hottest and most lucrative parts of the bond market has been loans made to homeowners with weak or subprime credit. But falling home prices and rising foreclosures mean an end to the party. At least 20 subprime lenders have shut down or cut back in recent months. And last week the second-largest purchaser of home loans, Freddie Mac, said it will stop buying those subprime loans that have a good chance of going bad. Cleveland State University Law Professor Kathleen Engel says the impact here in northeast Ohio will be mixed.
Kathleen Engel: If the secondary market won't purchase the riskiest loans then the riskiest loans won't be made. The problem for us here in Cleveland is that its too little too late.
Ohio leads the nation and Cuyahoga leads the state in the number of foreclosures with over 11,000 county-wide last year. Two of Cuyahoga County's biggest lenders are taking steps to protect themselves as their stock prices stumble: One of them, mortgage lender Countrywide Financial, is buying insurance on about a quarter of its loans; and the holding company for subprime giant Argent Mortgage Company is paving the way for a sale, possibly to Citigroup Inc. I'm Mhari Saito, 90.3.