The fallout from the subprime meltdown is already hitting the Southern California area harder than almost any other region in the country. Not only is the area home to some of the highest concentrations of non-prime loans as housing prices have soared out of reach for most residents, but it’s also the center of the universe for the subprime industry itself. It’s an industry that got its start in the mid-1990s as giant lenders like Countrywide began to seek out customers with less-than-perfect credit records (generally under 640 on the Fair Isaac Co. scale) and charge higher-than-standard interest rates.
Southern California, in particular, became the center of the industry for two reasons. By the late 1990s, it was a huge market with home prices much higher than in other parts of the country, which meant that people with modest incomes had to stretch to buy a home, according to Yongheng Deng, associate professor of policy, planning and development at the University of Southern California.