March 19, 2007
The loans are generally issued to buyers with spotty credit history, an inability to document their income or little money to make a down payment. Subprime loans have traditionally accounted for only about 5 percent of all mortgages, but that figure is increasing. Already, Los Angeles County defaults more than doubled in the fourth quarter of 2006, with 7,445 defaults compared to 3,480 a year earlier, according to DataQuick Information Systems.
“It’s definitely going to be a ripple where many people fall a level down in terms of the value of their homes and in terms of their economic status,” said Stan Ross, chairman of the Lusk Center for Real Estate at USC. “The whole market can eventually be dampened by this.”