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Originally Posted by aceventura3
Here is a definition of "subprime" - Any loan issued below average underwriting standards.
Therefore in the basket of all loans 49% of the loans issued are subprime or below average, by definition and this will always be true.
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This is completely incorrect and does not begin to realistically address what is going on in "subprime" lending.
There are a huge number of no-doc mortgages that have been handed out in the past 2 years. They are essentially ALL sub-prime and at high risk of default. They may have lowered the average creditworthiness of the pool of all borrowers, ,but the fact that a lot of garbage loans were added at the low end of creditworthiness does not mean that the definition of sub-prime gets revised downward.
Put another way, if banks stopped lending to "low risk" borrowers tomorrow, then ALL the loans after that would be subprime, not just the worst 49%.