(This is Part 1 of a five-part series. See Part 2, Part 3 Part 4 and Part 5.) Extensive payment problems among subprime mortgage borrowers, along with the failure of a number of subprime lenders, have been major news topics in recent months. Speculation about the causes of the defaults has been widespread. That is the topic of this article. Future articles will consider why so many lenders have failed, the impact of the crisis on the current availability of credit to prospective new subprime borrowers, and what -- if anything -- government should do. The final article will discuss whether the subprime market could and should be replaced, and, if so, by what. Ending of Price Appreciation: The immediate cause of turmoil in the subprime market was the end of house-price apprec...
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