The economic slowdown will be the first stress test of subprime mortgage lending.
Subprime loans carry higher rates.
Subprime mortgage lending expanded during the second half of the 1990s. The loans come mainly from finance companies and mortgage banks for borrowers with credit problems. Before the business got started, these people might not have gotten a mortgage at all. Or they might not have qualified for a large enough loan to buy the house they wanted. One-year adjustable loans stood at 6.2 percent.