Subprime mortgage defaults are soaring in the northern Californian city of Merced and angry local officials are placing much of the blame for the rout on property speculators from the nearby San Francisco bay area.

Subprime mortgages are typically granted to individual homebuyers with tarnished credit histories. But Merced officials say such loans were also granted in large numbers to investors, who used them to buy homes in the city known as the "gateway to Yosemite" because of its proximity to the national park.