Despite increasingly strict rhetoric from the Federal Reserve, near-record mortgage volume continues to be sustained by low initial teaser rates. But subprime mortgage lenders probably won't be able to afford the game much longer.

As of Oct. 14, the six-month forward Libor curve widened to roughly 4.7% at May 2006 from about 4.5% at that benchmark just two weeks earlier, due to continued indications from Federal Reserve Board members of further tightening to come. Meanwhile, the Mortgage Bankers Association's Purchase Index, currently at a value of 469.5, shows that home purchase activity remains near all-time high levels.

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