George S. Oldfield
The Brattle Group provides
consulting and expert
testimony in economics,
finance, and regulation
to corporations, law firms,
and governments around
We have offices in Cambridge,
Massachusetts; San Francisco;
Washington, DC; Brussels;
Mortgage Crisis Increases
The credit quality problems that first appeared in subprime mortgages last year
have begun to spread into other loan categories as we move further into 2008.
Prime mortgages, home equity credit lines, vehicle loans, and credit card receivables
are all showing increased rates of non-performance. Originators, servicers, guaran-
tors, and securitizers of these loans face increased exposure to legal actions by dis-
gruntled investors because these loans are major sources of collateral for securitized
deals held by various types of investment funds.
Page 1 www.brattle.com
This piece is a follow up to The Brattle Group’s Finance Newsletter from Fall 2007 titled
“Subprime Mortgage Problems: What to Look For and Where to Look”.
Go to www.brattle.com/publications to download a copy.
Expanding Subprime Mortgage Crisis Increases Litigation Risks
Spreading credit problems are evident in the in-
creasing rate of occurrence of troubled loans. By the
end of December 2007, about 2.2 percent of prime
mortgages were at least 60 days past due. This was
the highest percent of troubled prime loans ob-
served since the Mortgage Bankers Association be-
gan tracking prime mortgage problem loans in 1998.
In 2006, the 60-day delinquency rate was only 1.5
percent for prime mortgages. In the subprime cat-
egory, over one-fifth of mortgage loans were past
due or in foreclosure.
Vehicle loans, home equity lines of credit, credit
card paper, and other types of consumer borrowing
are starting to