You're right, and here's an example:
Two borrowers:
First borrower: He's a subprime guy because he went bankrupt 2 years ago. Made some mistakes, learned from them, and since then, he's reestablished a few small accounts, uses, but does not abuse, his new credit cards, and has less than $800 in new debt since then but his credit limits total $5000 (this is relevent because it shows he hasn't maxed out his new credit cards.) Credit score is 611 (for A-paper loans you need generally a 620 and 4 years out of bankruptcy,) he makes $4000 a month gross (about $2500 take home for sake of argument) and wants to purchase an $85,000 home, putting 5% down with money he's saved since re-establishing himself. His new payment will be about $650 with insurance and taxes, and after putting the down payment he'll still have cash in the bank. His rent has been on time for the last 2 years as well.
Second guy, 588 credit score, no bankruptcy but charge-off accounts out the wazoo and nothing ever paid on time, all the time. No money to put down, makes $3000 a month, $300 in monthly debts now and buying a $140,000 home. He QUALIFIES for the loan but his $1300 payment on his income will be much more risky plus the fact he doesn't exactly have a record of being timely on finances.
Chances are, the first guy will do just fine. The second guy will have big problems.
A while back on one of the talk shows they had an investment advisor on from IIRC like Money.com or somesuch.
They were talking about savings rates in America. This fellow said SEVENTY PERCENT of Americans are LIVING PAYCHECK TO PAYCHECK.
Now the figure seemed high to me. But even if you give him the benefit of the doubt and call it fifty percent, thats still an astounding amount. And I'm guessing a great many of these folks have mortgages.
The slightest burp in the economy could have some interesting effects.
Anybody ever hear of the Civilian Conservation Corps?