According to the LA Times, some lenders actually relaxed standards in 2006. Could it be that lending is still loose with many 2nd and 3rd tier lenders who need origination volume to stay in business? Just throwing some possibilities out there for consideration.
The shakeout in the sub-prime industry began last year as housing prices leveled off and interest rates rose, curbing demand for loans. At first, some companies loosened lending standards to keep loan volume high, a tactic that has produced a wave of early loan defaults. More recently, companies such as New Century have tightened their loan policies to reduce their exposure to mortgages that could go sour.
