One in seven homeowners with subprime ARMs were at least 30 days late on their house payments at the end of last year, according to the Mortgage Bankers Association.

The delinquency rate among borrowers with subprime adjustable-rate mortgages was 14.4 percent in the final three months of 2006. The delinquency rate was 11.6 percent a year earlier. The MBA defines delinquency as being 30 or more days past due on the mortgage payment.

About 9 percent of homeowners with subprime ARMs were more than 90 days late or were in foreclosure.

Delinquencies worsen
Ten percent of subprime fixed-rate loans are at least 30 days past due, up from 9.7 percent a year earlier, and 13.3 percent of all subprime loans (fixed-rate and ARM) were in default, up from 11.6 percent a year earlier.

These numbers show that subprime ARMs were the ones that went kablooey.

Doug Duncan, the MBA's chief economist, says the increase in delinquencies was expected.

"Increases in delinquency and foreclosure rates were noticeably larger for subprime loans," Duncan says. "Subprime borrowers are more likely to be susceptible to the cumulative increases in interest rates that we have experienced and the resultant nationwide slowing of home price, appreciation including, outright declines in some markets."

The market at work?
Duncan goes on to say that the industry needs no more regulations. He says there's proof that the market is working: Subprime lenders are losing money and going out of business because of their poor underwriting decisions.

"As we have noted before and as recent events have made clear, market discipline in this industry is swift, can be severe, and is more effective at changing lending practices than any potential changes in regulation," Duncan says.

Unfortunately, market discipline can be swift and severe for homeowners, too.