Why are Subprime Mortgage Lenders Crashing?

Although not all subprime mortgage loans involve borrowers who are poor credit risks, I'd say most subprime loans are those that fall outside the scope of traditional lending practices. That is to say that borrowers with high FICOs who do not wish to disclose income are subprime candidates as are those whose credit reports carry delinquencies. There is no one-size-fits all when it comes to figuring out the subprime market, but I'd say it's safe to figure that borrowers most destined to end up in foreclosure are those who fall into all three of the following categories:

1. Low FICO scores
2. No down payment
3. 2/28 adjustable-rate mortgage

Everywhere you turn today, newspapers, TV news and Internet real estate sites are spotlighting subprime mortgage lenders, turning the subprime mortgage crisis into a circus. It's a circus because not all subprime borrowers end up in short sales or foreclosures, and not all subprime mortgage lenders are making a profit off the backs of naive borrowers. Sometimes market conditions are ripe for such failures, and the buyer's markets prevalent in many parts of the country shoulder some of the responsibility.

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