THE SUBPRIME BLAH BLAH...HUH?

I have had a few "Joey" moments lately with my co-workers. For those who have not watched enough re-runs of "Friends," let me explain. This is a situation in which your friends are having a discussion regarding something that you are completely clueless about, while they seem to know everything and are able to discuss it articulately. My best attempt to camouflage my ignorance is to look concerned and nod my head like I know exactly what they mean, or act distracted by something else (magazine, something stuck to the bottom of my shoe). One such recent occurrence involved the SUBPRIME MORTGAGE CRISES. What is it? What does it mean? How does it affect me and my plans to get rich? I had to know so I did some research. Here is what I found:

The ‘US Subprime Lending Problem’ — explained in simple terms
from Pinoymoneytalk.com

Global stock markets are down, investors are on selling mode, and almost all of 2007's stock gains have been wiped out. The culprit, analysts say, is the current US subprime lending problem.
The subprime — what? And if it's supposed to be a problem in the US, why is it affecting markets in Europe and Asia?

What are Subprime Loans or Subprime Mortgages? These are loans or mortgages made to homeowners with poor credit ratings. Loans made to these people are of considerable risk because these borrowers are more likely to default on their loans since they already had financial problems before taking on the loan.

After a subprime loan is issued to homeowners, issuing banks usually sell these loans to investors. To compensate for the high risk, subprime loans typically pay higher yields. Attracted by the higher yields, a number of mutual funds and hedge funds in the US invest in these loans.

What is the current Subprime Lending Crisis? Beginning in late 2006, many subprime mortgages have become delinquent as homeowners run into financial difficulty. More than two dozen subprime mortgage lenders have already failed or filed for bankruptcy due to rising incidents of subprime foreclosures.

How is this affecting the markets? A number of hedge fund companies and investment banks that invested in subprime loans incurred millions of losses or even went bankrupt due to the subprime lending problem. The possibility of tightening credit conditions also caused volatility and panic in the US stock market, which consequently sent fears to European and Asian markets that the US, one of their major trading partners, is on the verge of an economic recession. These fears and uncertainties are responsible for driving world stock markets to their recent lows.

ALSO, CHECK OUT THESE LINKS TO OTHER EXPLAINATIONS:

http://www.businessweek.com/investor/content/mar2007/pi20070313_837773.htm

http://en.wikipedia.org/wiki/Subprime_meltdown

https://www.oppenheimerfunds.com/targetedCopy/InvestorPages/investorTimelyTopics/invArticles_08-10-07-153925.jhtml