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than 1 per cent of all US mortgages will end in default, the reason was as likely to be unexpected medical bills or a lost job as abusive lending by a mortgage company, a Bankers Association spokesman said.
The problems of the subprime market have sent shudders through financial markets, amid fears they could spill over into the broader economy. On Monday, New Century Financial, one of the largest US subprime operators, filed for bankruptcy protection.
But the true picture is more complicated. The subprime market is huge, involving loans worth a total $1.3 trillion
(£660bn). But although one in six subprime borrowers are at least two months behind on their payments, the majority are not. Moreover, the rate of overall homeownership has jumped from 64 per cent to 69 per cent in little more than a decade, largely thanks to the subprime market which helps people not previously eligible for loans to obtain them.
"We Thought it Was a Great Deal"
Tim and Angela Sneary bought their little slice of the American Dream back in 2004. They were smitten by the house the estate agent had shown them in Denver, Colorado - drawn by both the bright-pink paint and the property's $240,000 price tag. "We thought we were getting a deal," said Mr Sneary.
They especially thought they were getting a deal when their agent told them he would find them a mortgage that required no deposit down.
Initially, they thought they would be borrowing at a fixed rate of 6.5 per cent. Each month they would have to pay $1,290, little more than their current rent.
But when they came to close to deal, things had changed. The loans were rather different, and the interest rates were much higher. Now, the Snearys wish they had walked away, but instead they took on additional jobs.
Today the Snearys are set to lose their home. Their problems began when Mr Sneary lost his job and had to take less well paid work. They soon fell behind on their payments. Mrs Sneary took on more hours but, in July 2005, she was in a car crash that left her unable to work for several weeks.
The Snearys are now seeking to sell their home to avoid foreclosure. They have less than two months to do so.
"[The lender] said you're going to have to pay ... or we'll have to go to foreclosure," Mr Sneary said. "Well, I guess I'm going to have to go foreclosure because I've given everything I have to give and you can't squeeze blood from a turnip."
The couple's plan now involves finding new jobs and a place to rent, and they will try to save some money. When they come to buy again they may even make an offer to another family seeking to avoid foreclosure.
Boom Then Bust
An estimated 1.5 million homeowners in the US face foreclosure this year.
In the 1960s, 1970s and 1980s, home ownership in the US stagnated at around 65 per cent. In the past 15 years, it has risen to nearly 69 per cent.
According to a study released last month by agencies devoted to fair housing, racial minorities are more likely to be given high-cost, subprime mortgages - in six major American cities, black borrowers were 3.8 times more likely than whites to receive a higher-cost home loan.
Last year, subprime loans made up 20 per cent of the market for new mortgages.
US interest rates have increased sharply recently - in 2003 and 2004 they were at a historic low of 1 per cent. They have risen to more than 5 per cent.
In the past five years, the subprime market has risen sharply - it now accounts for nearly a quarter of new mortgages and is worth about $665bn (£337bn). In 2001, it was worth about $200bn and only accounted for 10 per cent of loans.
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