Steve Antler, EconoPundit, has returned to blogging after a several month hiatus necessitated by his breaking both of his wrists. Welcome back, Steve.
In his post for today Steve links to a St. Louis Federal Reserve study that goes a long way towards answering the questions I asked about subprime loans yesterday. Thanks, Steve.
While I’m digesting the information, I can’t resist jumping to the summary. The study reports that the history of subprime loans can be divided into two distinct periods:
The first period, from the mid-1990s through 1998-99, is characterized by rapid growth, with much of the growth in the most-risky segments of the market (B and lower grades). In the second period, 2000 through 2004, volume again grew rapidly as the market became increasingly dominated by the least-risky loan classification (A– grade loans). In particular, the subprime market has shifted its focus since 2000 by providing loans to borrowers with higher credit scores, allowing larger loan amounts, and lowering the down payments for FRMs.
I think this may tend to support my intuition.
