Banks and borrowers face many issues related to mortgages, but
one pervasive problem is little understood by investors. Prior
to the collapse in housing, the mortgage industry had developed
many new kinds of residential mortgages that were not a part of
the government-sponsored or guaranteed programs but were also
not subprime. These programs offered payment and term schedules
that were not part of the standard government programs. Many
borrowers opted to use these loan programs, even if they had the
credit to qualify for a Fannie Mae, Freddie Mac, FHA or VA loan,
because these loans were in many cases less expensive, with
lower interest rates and payments and less paperwork than the
government programs. This group also included many borrowers who
had what were at the time considered jumbo loans. When the
subprime housing market collapsed, these loans disappeared,
because the secondary market for mortgage bonds backed by non-
government-supported mortgages disappeared. Before the housing
crash and the effectiv