You're listening to K-YOKEL Radio, 1298.9 on your FM dial, where we cover the world from a 5x5 closet. Today's breaking news is the subprime mortgage crisis that's gripping American financial institutions. In the studio today we have Elwood from Lucretia's Loans and Tonic Remedies.

So Elwood, tells us about your business.

We loan money out of Lucretia's garage -- mostly house loans. Our motto is, "We lend you money, even if your hog's neutered."

That policy would seem rather risky. You must have a screening process.

We don't check up on folk's private affairs; the bad eggs are easy to spot. Maw always said, "It don't take a genius to spot a goat in a flock of sheep." Plus, who has time?! Those adjustable rate home mortgages are hotter than moonshine.

Those are also known as ARM loans and big in the news. How is the subprime ARM crisis affecting you?

Prime's when it's fresh road-kill; I reckin subprime's been thar for a while.

No, it's a term for high-risk borrowers, who usually have little, no, or poor credit ratings and minimal cash for a down payment. Does that sound familiar?

Yep, but we don't mention down payment cuz folks start getting scarce as hen's teeth. Sure, lending to folks with little ka-lat-a-rall is a bit scary but we offset this by charging them through the nose.

Some subprime opponents allege that lenders, such as yourself, use predatory lending, hoping unqualified borrowers will not meet the loan's terms and you'll rush in and foreclose on the property.

You been talking to cousin Bubba? I told him to keep his trap shut or we'd end up on a chain gang. Yeah, we have to klect now and then. I have a real nice 2 bedroom out by Willow Crik. You wanna have a look?

No, not right now. House prices were climbing at a tremendous rate, but now have started to tumble. Does that affect you at all?

We do the best we can. Fortunately, most of our loans, even the one I give cousin Fred's sister Elmira after she lost her pig, got sold off to that-there investment company.

Do they call you and wonder where your payments are?

Ain't got no phone, but I'm not frettin. They's said they'd chuck those loans in a sack and sell them to rich folks.

You're speaking of securitization where a variety of loans are repackaged into what can be called Mortgage-Backed Securities. Financial investors buy and sell these in different forms, including Structured Investment Vehicles and, before you know it, nobody knows what they've bought.

Lans-sakes! I don't know nothing about that. But that city fella who'd bought our loans said they'd end up hidden neatly away in a High Grade Structured Enhanced Leverage Fund. A clever name so's folks wouldn't know they was buying a loan giv'n to Elmira who hasn't worked in years?

Did that city guy work for Ameriquest, American Home Mortgage, or New Century Financial?

Don't rightly recall. Nice fella with a car what's got a phone.

Are you aware defaulted subprime ARM loans have roughly tripled since 2005? They're a small percentage of total outstanding loans yet were 43.0% of the 2007 third quarter foreclosures, amounting to almost $200 billion.

You've been to school, haven't ya? Well, I always say, "Lettin' the cat outta the bag is a whole lot easier 'n puttin' it back in." Guess somebody'll fix it.

Well president Bush says help is just a phone call away as troubled adjustable rate home mortgage holders should call the Hope Now Alliance at 1-800-SPENDTAXMONEY -- brought to you by the same administration that's stuck in Iraq.

I voted for him, or was it his paw? Can't rightly remember.

Well, there doesn't seem to be a simple solution as the problem reaches deeply into the financial investment world. Something needs to be done soon as in the next 12 months almost $500 billion subprime ARMs will reset to higher interest rates. That could spell more foreclosures, lending institution bankruptcies, and dismal stock market performance. It looks like everyone will pay. Have you ever heard of a recession?

Yep, that's what happened to aunt Sophie's gums.

Close, but we've run out of time. Thanks for coming in to the studio and visiting with us.

Glad to and here's somethin' my paw use to tell me, "If you find yourself in a hole, the first thing to do is stop diggin'."