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It’s no secret: The ‘credit crunch’ is not contained to the subprime sector. Subprime, depending on who you listen to, was about 10-15% of the overall mortgage market up until the point when things started to crumble in January of 2007, and then really fell apart in August of 2007. For a while, the Fed, other economists, and certainly the mortgage industry was defiant about the idea that this little fire would be put out before catching the whole forest ablaze.
If 15% of the market is in peril, why are 75% of the banks “tightening” their guidelines, or in other words, making it harder to qualify for borrowing?
See evidence of this in the chart below.