Subprime Subprime Subprime

From Briefing:

"When we look back on the mortgage market ten years from now, New Century Financial (NEW 14.65) is going to be held out as a glaring example of the risks involved with sub-prime mortgage lending. Whether the company itself still exists ten years from now is another question. Right now, it doesn't look good."

Thanks, Sherlock.

Why did subprime loans get so popular? Subprime loans made up 12.75% of the $10.2 trillion mortgage market in 2006, up from 8.5% in 2001, according to Inside Mortgage Finance. The homeownership rate has grown to 69% from 65% over the past decade, about half of which came from subprime lending, according to a study by the Federal Reserve Bank of Chicago.

Everyone expect the housing downturn to spread through the rest of the economy. Housing sales had crashed. Housing prices had came down. Sub-prime loans are blowing up. Yet, we still have +2.2% GDP and the stock market up double digits last year.