Tuesday 13 - Why is California Seeing Such a Down Market? Question: Why is California seeing such a down market? It can't be all related to subprime lending. Answer:The mortgage meltdown is not and has never been about subprime lending by itself, the problem has been the widespread use of toxic mortgages and stated-income loan applications. Subprime borrowers have gotten a lot of attention merely because they have limited incomes and credit, thus they are the most likely to fail when monthly mortgage bills increase -- but they are not the only borrowers who are failing. And monthly mortgage bills, of course, are bound to increase because exploding ARMs are designed to assure exactly that result. California now ranks second among all states in terms of foreclosures according to . Foreclosures in the state were up more than 100 percent in March when compared with a year earlier. California has had steep price increases in recent years, in part because buyers were able to get big loans -- in some cases by inflating income claims which lenders then did not check. Borrowers who did not inflate incomes were at a bidding disadvantage in this process, and now they are being hurt by the borrowers and lenders who abused the system because home values have fallen in many markets.