If you want to define sub prime as 100% no-doc or stated income loans, then almost all of those loans written over the last three years are 80-20%. At least so far as I’ve seen, and at least five or six a week go through my office. I cannot recall seeing one of those that didn’t have PMI either.
But interest rate resets are the smaller part of the problem, it’s usually the principle that the borrowers cannot pay anymore. The houses they bought were just too expensive, having been bid-up by all the easy credit.They are tapped out; their credit cards are at their limit, and they can no longer use plastic to buy necessities, thus saving their wages for the mortgage payment. Their wages too are declining as part of the general economic slow-down, especially if they are in any business even remotely tied to real estate, hone improvement, or mortgage lending.
What’s going to happen? More easy credit; just watch. Banks can’t make any money if they don’t lend, so watch for mortgage interest rates to fall to maybe 5.5% soon.
I've read that the piggyback loans have dried up for obvious reasons. Is that what your seeing? The piggyback loan is tax deductable while PMI isn't and that was another reason the piggyback was popular.