The LA Times reports on the subprime lending business. "Profit at Ameriquest Mortgage Co. and its affiliates plunged 81% last year, reflecting a brutal price war over loans to higher-risk borrowers, rising interest rates and the company's agreement to pay $325 million to 49 states to settle allegations of predatory lending."

"The privately held parent of Ameriquest and its sister lenders, earned $257 million in 2005, down from $1.34 billion in 2004, according to copies of its annual financial statements obtained by The Times."

"The company says that this year it has scaled back its aggressive price cutting on loans, part of an industry battle for market share at a time of rising interest rates and slowing housing markets."

"If anything, Ameriquest's market share is likely to erode even more, said Robert P. Napoli, who analyzes the mortgage business. 'They'll be lucky if their volumes don't fall by 90% on the retail side,' Napoli said."

"'It seems like they were trying to pressure the market in hopes they would force other lenders out of business with this aggressive pricing,' he said. 'But we've been following the mortgage industry for a long time, and that strategy generally doesn't work,' Napoli said. 'A company like Countrywide can lay back and just wait for [other lenders] to hit the wall, which is what looks like has happened here.'"

"Some observers saw in Ameriquest's earnings a reflection of hard times ahead for the entire industry. 'We are expecting some subprime lenders to go out of business this year,' said (industry analyst) Christine Clifford. 'The combination of a shrinking market, rising costs and lots of lawsuits is extraordinarily difficult to manage,' she added."

And an Idaho television station reports on exotic loans in Treasure Valley. "Homes across the Treasure Valley continue to gain worth, and more and more people are jumping into the market head first. 'We live in a good market. We live in a market right now where property values are constantly increasing,' said Brett Anderson, owner of Security First Mortgage."

"Also increasing, the rise in popularity of the option adjusted-rate mortgage, also called the pay option ARM. 'I have a couple that just bought a second home, a vacation home they never could have afforded, but on this program,' said loan officer Ricky Catalano."

"But this type of mortgage is still fairly new in Boise, and officials say it would only work in about six or seven places in the entire USA, and we're one of them. 'In this kind of appreciation world it still continues to be a good loan for a lot of people. It isn't a loan for the weak or conservative because it is a very aggressive program,' said Catalano."

"In other areas of the United States, the loan is just starting to run its course and they're seeing a sharp increase in foreclosures. 'If they are presented with the chance to buy a little nicer home people get ahead of themselves as to what they really can afford,' said Tom Lay, of Neighborhood Housing Services."