|
Sub Prime Loans
Everything you need to know to get lowest rate.
Avoid mistakes for more savings.
Find the Best Mortgage. |
|
|
SUB-PRIME/BAD CREDIT LOANS
Things are different now, thanks to the so-called sub-prime mortgage lending, which accounts for almost one out of every four home loans currently being written. Today, mortgage brokers barrage consumers with offers of no-money-down loans, and last year, “more than 37 percent of sub prime loans were made without verification of borrowers’ incomes,” The New York Times notes. Nor do such mortgage lenders typically require borrowers to escrow money for property taxes and homeowners’ insurance.
And the original lending institution now often sells the mortgage loan on the financial markets rather than hold onto it. When times get tough, faraway investors are even less open to renegotiating terms than local savings and loans were.
The boom in this industry has been extraordinary. “From 1994 to 2005, the sub prime loan market grew from $35 billion to $665 billion,” the Center for Responsible Lending notes in a report entitled “Losing Ground: Foreclosures in the Sub-prime Market and Their Cost to Homeowners.”
Experts Predict that that one-third of families who received a sub prime loan in 2005 and 2006 will ultimately lose their homes.
While opening up the possibility of homeownership to people with lesser means or spottier credit is something that progressives have advocated for a long time, the way the private sector has done this has been criminal. “Because the sub prime market is designed to serve borrowers who have bad credit or credit problems, one might expect the industry to offer sub prime loan products that do not magnify the risk of loan failure,” the report says. “In fact, the opposite is true.”
|
