Readers suggested a discussion on subprime 'contagion.' "Topic: Debunking the 'subprime is contained' meme, which is propagated from above by top U.S. economic policymakers."

A reply, "Some are saying spill over, others say no problem. Being that alot of the debt was sliced, diced, pureed, and distributed, who’s to say any spill over will occur. News reports from various sources are contradictory."

To which one said, "Yeah, I’m making a layered cake. I’m starting with PRIME eggs and butter, mixing in Alt-A sugar, flour and yeast then I feel like I will throw in just a smidgen of SUBPRIME dogs*@t. Because hey, I have to get rid of it and just a little bit shouldn’t hurt the overall product since it is just a small percentage of the ingredients. Any takers on the taste test?"

Others question what the prime borrowers reaction will be. "Will prime borrowers who could pay the mortgage if they accept perpetual house poverty and a very low standard of living, continue to do so if they know the value of their home has dropped?"

"We’re getting the fraud defaults. We’ll get the payment shock defaults. And we’ll get the usual divorce, illness and job loss defaults. The question is whether or not others will walk away rather than pay 50% of their income for housing."

A reply, "I don’t think people will walk until they are forced to walk. People think their house is valued at the price they paid for it (even more) despite any contrary evidence that is presented to them, hence they will fight to keep their home."

"Drilled into homebuyers is the mantra 'real estate always goes up in value,' thus any decline in price obviously must be temporary, and even a buying opportunity. If they sell out at a lower price than at which they bought then they demonstrate to themselves that they are something less than the financial astute people they imagined themselves to be."

Another said, "That may have been the case in the past, but this time is different. These people have grown accustomed to thinking they are entitled to spend $5,000 on rims, and go out for sushi once or twice a week."

"Once the house stops providing that lifestyle for them, they will stop paying. These are NOT responsible people who care about their reputations (that includes their credit scores). Better to rent for half the cost and still be able to party it up."

From MarketWatch. "American Home Mortgage Investment Corp. said that it's stopped offering some types of so-called Alt-A mortgages because of the high cost of delinquencies on those loans."

"The warning suggests that problems in the subprime-mortgage business have begun spreading to other parts of the home-loan industry."

"'During March, conditions in the secondary-mortgage and mortgage-securities markets changed sharply,' said Michael Strauss, American Home's CEO. 'While the market may recover...our working assumption must be that current market conditions will persist.'"

"American Home also indicated that it continues to be affected by the high cost of delinquencies, especially on Alt-A mortgages, and that it's been forced to repurchase some of these loans."

"The company announced that it's stopped offering certain types of Alt-A loans that have been particularly prone to rising delinquencies and repurchases. Those are loans where the homeowner borrows a relatively high portion of the value of a property and simply states an income, rather than documenting it."

"American Home isn't a subprime lender. In early March, the company issued a statement to clear up any 'confusion' about the type of loans it offers. Most are adjustable-rate mortgages and so-called Alt-A loans, which often require less documentation."

"American Home said Friday that earnings will be lower because investors in the secondary-mortgage market and the market for mortgage-backed securities (or MBS) offered to buy its loans at 'materially lower' prices."

"Lower prices for AA-, A-, BBB-rated MBS and riskier bits known as residual-mortgage securities also triggered losses in American Home's investment portfolio, the lender added."

From Reuters. "Citigroup Inc., the largest U.S. bank and one of the largest U.S. mortgage lenders, is telling brokers that on Monday it will stop making some riskier home loans, documents obtained by Reuters show."

"The changes at Citigroup's main home loan unit, CitiMortgage Inc., would limit no-money-down second mortgages and raise the minimum credit scores needed to obtain them. Borrowers take out second mortgages when they cannot get 100 percent financing from a single lender."

"According to e-mails obtained by Reuters, CitiMortgage will stop offering second loans to some customers who want to finance 100 percent of homes' values and cannot fully document their own finances."

"The unit will require 5.01 percent down on some second, sometimes called combo, loans, and 10.01 percent down where financing involves home equity or interest-only loans, the e-mails show."

"The documents also show that CitiMortgage will raise the minimum 'FICO' credit score needed to obtain any combo loan to 650, and eliminate the 620-649 category. Borrowers with FICO scores below 620 are commonly labeled 'subprime,' meaning they have higher credit risks."