Perspectives on the Subprime Mortgage Market

This paper consists of four short pieces on the subprime mortgage market. Based upon a proprietary database, LoanPerformance, of 80 million mortgage loans originated from January 1999 to July 2007, these pieces demonstrate: (1) the subprime loan market has contributed to a net gain in homeownership; (2) the distinction between subprime and prime borrowers cannot be easily made on the basis of FICO scores and the wide variety of products used by subprime borrowers are also used by prime borrowers; and (3) foreclosures on subprime mortgage loans that are fixed-rate, variable-rate, and hybrids with interest-rate resets are already a serious problem, which means that while hybrids may exacerbate mortgage problems if interest rates reset upwards in 2008 and 2009, the product itself is not the cause of those problems