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I hate absolutes, but if I had to say one about this situation I would have to say that "subprime mortgages written before the second half of 2005 are solid" is more true than not. I'll leave it to you to figure out why.

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I assume this has to do with home price appreciation and the fact that a lot of 2/28's from then have already reset. On the other hand, underwriting standards already became comical in late 2004 and early 2005. Add that to the locality effect (bad loans tend to be clustered in neighborhoods which can change RE fundamentals by making those areas less desirable) and that most of those subprime borrowers are simply not ready for the payment shock.

But this is all moot as small lenders shouldn't have a lot of exposure to performance of loans in the 2004-2005 vintages. Where they are going to make money going forward (and how creditors view their prospects) is a much bigger concern. What lenders are essentially engaged in is an arbitrage between the price of mortgages in the primary market (what borrowers are willing to pay) and in the secondary market (what investors are willing to pay). There is no real arbitrage at a volume that can keep very many lenders in business.