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Subprime late payments

A chart in today's WSJ showed the number of people keeping up with mortgage payments on subprime loans is improving. During the last quarter about 7.6% were late and that's dropped to 7.2% (this compares to .8% and .6% in prime). Missed payments were high in mid-1999, then dropping way down to under 2% in mid-2003. Obviously, the reasons for this have yet to be sorted out. But it must not be the economy, or how much was loaned to poor people vs how much to speculators. Subprime loans went to low income people who were poor credit risks and to high income people with high debt in relation to their income. The rest of us went the standard route--10 or 20% down and fixed rates.

But here's what's interesting. After 9/11 there was a drastic drop in late payments for both types of loans. As the economy soared, so did late payments. Seems to be psychological, not financial.