Sub prime loans, like all ARM loans, are designed as tools to assist borrowers in accomplishing a certain goals. Sub prime companies did not set out to lend people money so that they thought would default, and go into foreclosure, they don't want the property: They want the payments.  I don't understand the logic that I have heard on numerous occasions that the loan servicers wanted the added expense of taking back the collateral. Do you know how much it costs to foreclose? 

As a mortgage professional, and someone who tries to help my borrowers have a financial strategy, I have put people into sub-prime loans as a way of getting someone into a home. After leaving my office, my clients have a strategy as to what to do for the next 2-3 years to fix the "reasons" why they were put into a sub prime loan in the first place.  They had 2 years at a decent rate to heal their credit problems, and with credit problems, time is the greatest healer.

Sub prime loans, used properly as a band aid, are a terrific tool.  When you have credit problems, like real wounds, you have to do some things to get them to heal rather than just cover them up.  You have to have a strategy, a plan to make things better, and that is where I believe a lot of people went wrong. A lot of mortgage brokers probably didn't offer advice on what to do, some borrowers just didn't listen to what they were told, and some lacked the discipline to follow through with the plan, none of those things are the investors fault.