Many lenders loosened their underwriting standards for borrowers who otherwise might not have qualified for traditional loans. Use of stated income and other subprime loans jumped during the real estate boom, when appreciation rates soared and equity protected most homebuyers from defaulting on their loans. Most could simply refinance or sell homes at a big enough profit to pay off mortgages and move on. About 5.1 percent of all homeowners hold subprime adjustable loans. Among those borrowers, 85 percent are making payments on a timely basis, according to the Mortgage Bankers Association in Washington, D.C.
However, the extent of the repayment problems could mount.
"We still have a lot of these loans that some of the people with good credit are still making payments, but their loan hasn't adjusted yet," said Stan Ross, chairman of the Lusk Center for Real Estate at the University of Southern California. "The question is, how many of those are going to be in trouble?"