In this instance, this originate-to-distribute model appears to have contributed to the breakdown in underwriting standards, as lenders often found themselves able to pass on the credit risk without much resistance from the ultimate investors. For a number of years, rapid increases in house prices effectively insulated lenders and investors from the effects of weaker underwriting, providing false comfort.
Another concern is the substantial number of borrowers with subprime ARMs whose interest rates are scheduled to reset upward--about 1.5 million in 2008.