San Francisco (MarketWatch) - The West is the best, sang a “60 ’s rocker - and that sentiment also rings true among subprime mortgage authors.

For carriers of curiosity about which companies wade deeper into the now-stormy subprime mortgage market, a snapshot of the first 10 authors in the fourth quarter shows a strong inclination toward the west.
Seven of the 10 are based in California, according to a ranking published by trade publication National Mortgage News. One, Washington Mutual Inc.

Of course, many of these mortgages - a class of loans to higher risk borrowers - financed houses in New Jersey, Minnesota and Florida. However, many houses are likely to be in California, the source of most of the subprime mortgages issued in 2005, which was a banner year for the mortgage market.
“House price appreciation was very fast through California, and serving as an incentive for all people across the spectrum to get a toehold in the housing,” said Tony Hughes, director of credit risk analysis of Moody’s Economy . com.
Increased housing prices also encouraged lenders to do business with borrowers dogged by past credit problems.
“In a bullish market, the prospect of lenders losing money on loans to relatively pretty poor credit risk of borrowers is mitigated by the fact that the value of the collateral is rising rapidly,” he said.
But the industry is facing a severe reversal of those days.
Many of the most active subprime mortgage lenders have lately warned that a surge of late payments from their borrowers - or no payments at all - will hurt earnings.
For borrowers already stretching to make monthly payments, rising interest rates and stagnant or falling home prices removed the option of refinancing to secure lower payments - an important safety valve that had kept Many mortgages in the black.

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