loquitur

The subprime market is a fairly risky one. What tends to happen is that the lenders make the loans because they can get fees for it. Then they package the loans and sell them if they can, while keeping a servicing contract. That way they reduce risk while still making money.

People go to subprime lenders precisely because they can't get conventional mortgage loans. After a certain period of time of making high payments, which is what subprime loans usually require (they charge higher rates and higher fees), the borrower falls behind. This housing market has been hot long enough that the cumulative impact of years of high payments is starting to bite.

And no, it's not a good sign.

That does not mean, however, that the economy is about to tank. All it means is that one sector will retrench.