PHOENIX - While subprime lenders try to recoup losses from declining mortgage origination volume, corporate belt tightening and industry consolidation could impact loan performance, according to attendees at last week's ABS West 2006 conference here.

The subprime lending industry - fueled by years of low interest rates and an accelerated pace of home price appreciation - has an infrastructure that most say is unsustainable during an environment that includes a rising federal funds borrowing rate, slowing home price appreciation and increased regulatory scrutiny. Investors need to keep an eye on underwriting, due diligence and servicing quality, conference speakers said.

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