The sign of the busting of bubble started to show from the middle of 2006 with the transition of loan from ‘interest only’ and ‘teaser rates’ to regular payments. This coupled with increase in market interest rate led to doubling or even tripling of monthly repayments. Unable to pay the increased monthly repayments, borrowers began defaulting and surrendering their houses adding to the pile of inventory of unsold houses. Unsold inventory was up nearly 40% in sept ’06, around the time when prices began to decline.
Subprime Crisis… (Part II)
