by Calculated Risk on 1/28/2007 06:24:00 PM

From the OC Register: Subprime's grip slips

Many of Orange County's boldest lenders are struggling to stay in the black – and in some cases to stay in business – as their customers miss mortgage payments in record numbers.
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Sluggish home prices, rising interest rates and lax underwriting spurred defaults on subprime loans made just last year to the highest level in six years. Perhaps most troubling, loans made by Orange County companies in 2006 were among the quickest to see defaults, data show.

And many of those subprime companies – which tend to cluster here in Orange County – are in trouble.
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UBS Investment Bank ... found subprime loans made in 2006 are on track to be the worst-performing loans ever issued.
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So what went wrong, exactly?

Lenders made two mistakes, according to UBS and other analysts. They didn't scrutinize borrowers' incomes, and they allowed subprime borrowers, who by definition have had past problems with their credit, to take on lots of risk.
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Borrowers gambled on rising home prices to bail them out of trouble, analysts said. Consumers thought home prices would keep climbing, which would enable them to sell or refinance if they got into a jam, analysts said.

The article has this great quote:

"[Borrowers] lost the motivation or incentive to send in the checks."
David Liu, director of UBS' mortgage strategy group, Jan 28, 2007

This sounds like a quote from "Office Space":

PETER: I, uh, I don't like my job. I don't think I'm gonna go anymore.

JOANNA: You're just not gonna go?

PETER: Yeah.

JOANNA: Won't you get fired?

PETER: I don't know. But I really don't like it so I'm not gonna go.

JOANNA (LAUGHS) SO YOU'RE GONNA QUIT?

PETER: No, no, not really. I'm just gonna stop going.

JOANNA: When did you decide all that?

PETER: About a week ago.

JOANNA: Really?

PETER: Oh, yeah.

JOANNA: Ok. So, so you're gonna get another job?

PETER: I don't think I 'd like another job.

JOANNA (LAUGHS): SO WHAT ARE YOU GOING TO DO ABOUT MONEY AND BILLS?

PETER: Y'know, I never really liked paying bills. I don't think I'll do that either.