Measuring the subprime mess

Well, what do you think is going to happen when someone with a poor credit history can "buy" a house without a downpayment and with crazy-low introductory mortgage payments - only to see those payments jack up by 50 percent or more after the introductory period runs out? That pretty much sums up the subprime market. Dirk van Dijk, director of research at Zacks Investment Research, notes that subprime adjustable-rate mortgages originated in 2006 have a 4.62 percent default rate, which is 52 percent higher than loans a year earlier and 137 percent higher than loans made two years earlier. "Out of the group of people who bought homes in 2006," he's quoted in Marketbeat, "nearly one in 20 had already defaulted on their mortgage by the end of last year." Incredibly, many of those defaults happened even before the initial rate adjusted higher.

BTW, hedge fund manager David Einhorn, who put up a stink about the way OC-based New Century Financial was being run, has resigned from the board. Einhorn is a principal at Greenlight Capital, which owns 6.3 percent of New Century shares. New Century is under criminal investigation into securities trading and accounting.


More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent stories:
Siri versus Hawaiian pidgin (video)
Letter from Down Under: Welcome to the Homogenocene
One last Florida photo
Signs of Saturday: No refund
'I Am Woman,' hear them roar

New at LA Observed
On the Media Page
Go to Media

On the Politics Page
Go to Politics
Arts and culture

Sign up for daily email from LA Observed

Enter your email address:

Delivered by FeedBurner


Advertisement
Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
LA Observed on Twitter and Facebook