Subprime mortgage lending can be a high-margin business, but danger lurks everywhere. Green Tree just got hit hard on prepayment risk, but I believe the real risk in the sector is a giant firestorm of credit risk to those who are not prudent in their lending policies.

The mortgage lender struggling to make one point per loan is understandably drawn to a product where obtaining 4 or 5 points from the borrower is typical.

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