A wave of defaults on "subprime," or high-risk, home mortgages has not only rocked the Dow; it also threatens to ripple through the economy. Here's how
WHEN HOMEOWNERS CAN'T PAY ...
Borrowers with poor credit and unusual loans have often taken on more debt than they can handle. And if rates rise, they are vulnerable to default and even foreclosure.
... MORTGAGE LENDERS GET HAMMERED ...
Many lenders resell their high-risk mortgages to investment banks. If defaults rise, the lenders are often forced to buy back the bad loans, which hurts earnings and stock prices.
... INVESTMENT BANKS LOSE BUSINESS ...
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