Why have they been irresponsible?  Well, for a start they were allowing people with very bad credit histories to take out loans and many of them weren’t able to keep up with repayments.  As a result lots of homes have been foreclosed and are now selling for peanuts.  Many homes are just sitting empty and have turned the area into a ghost town.

Another problem with the banking industry is that mortgages given out were as much as 125% of the purchase price.  This means if you bought a home for $100,000 you would be about to take out a loan for $125,000.  But what happens when there is a crash in property prices and your home is now only worth $80,000?  Well, you’re into negative equity which causes real problems if you want to sell your home or refinance.

Another big problem was that people were taking out Adjustable Rate Mortgages (ARM) which started off at a very attractive low rate of interest.  But eventually the mortgage interest rate jumped up to an amount that was unaffordable.  So therefore people were “delinquent” on the mortgage resulting in foreclosure.

So if you’re now in a position where you have bad credit and/or negative equity you might feel really depressed about your finances.  A lot of people are getting re-mortgages at a lower rate of interest however this is normally only good for those who are not in negative equity or only by a small amount.

So as you can see things are very different in terms of getting finance compared to some years ago.  If you are looking for a low FICO score home loan, or want to refinance your negative equity home you are going to find it tricky.  So make sure you read as much as you can and learn about what new developments are happening in the finance industry.

What goes up must go down, and inevitably what goes down will eventually come up. It doesn’t have to, but it always does. The trick is to read the signs, and prepare your self and your portfolio for the change. All markets including stocks, bonds, real estate, and technology work in cycles. The only thing you can count on, is that they won’t remain static. They always change. If you keep investing and borrowing the way you’ve always been doing, eventually your going to get burned. Just ask all the victims of mortgage for foreclosures and the sub-prime fiasco.

Probably one of the hardest lessons learned from this particular recession, is don’t gamble with the big stuff. In other words, don’t take stable big dollar funds (like college education funds) and go big on emerging technology startups. The risk is just too great. Sure, someones going to pipe up and tell me a story about how they had a friend of a friend who made hundreds of thousands of dollars overnight doing just this sort of thing. The problem is, nobody ever talks about the times they gambled and lost. It doesn’t make for nearly as interesting a story. Know what you can afford to lose, and don’t go beyond that.

Things can happen pretty fast these days when it comes to investments. Thanks in large part to the role computers play in investing. I was looking at some software the other day, that automated Forex trading for day traders. It’s pretty remarkable how a computer program can watch fluctuating stock prices, and buy and sell all on it’s own. It’s also a little bit scary, when you realize that this is real money it’s playing with. You really need to know what your doing, before you let computers empty out your bank account.

Another painful little lesson we investment types have learned from this downturn, is that there is no such thing as a sure thing. The traditional conservative blue chip stocks were also hit painfully hard this time. Diversification is important here, even if you stay away from the riskier start up stuff the venture capital types like to dabble with. The bottom line is do your due diligence, and always be aware. You need to stay current and don’t always listen to what the experts have to say. Eventually, even they get it wrong.