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Many borrowers whose credit scores might have qualified them for more conventional loans say they were pushed into risky subprime loans. They say lenders or brokers aggressively marketed the loans, offering easier and faster approvals -- and playing down or hiding the onerous price paid over the long haul in higher interest rates or stricter repayment terms. - Wall Street Journal, December 3, 2007
One common assumption about the subprime mortgage crisis is that it revolves around borrowers with bad credit who couldn't have bought a home without paying punitively high interest rates.
It turns out (like I've been saying all along!) that plenty of people with seemingly good credit are also caught in the subprime trap.
A study done in 2004 and 2005 by the Federal Trade Commission found that many borrowers were confused by current mortgage cost disclosures and "did not understand important costs and terms of their own recently obtained mortgages. Many had loans that were significantly more costly than they believed, or contained significant restrictions, such as prepayment penalties, of which they were unaware."Lending advocates have long alleged that minority and poor borrowers are often steered into subprime loans that carry excessively high interest rates and steep prepayment penalties. But the growing use of subprime loans by people with higher credit scores suggests that such problems exist among a much wider swath of borrowers than previously thought and may have little to do with the ethnicity of borrowers. - Wall Street Journal, December 3, 2007
Even more significant is the fact that many mortgages that are foreclosing now are not even the subprime type.
With the higher costs of living, including gasoline, food and utilities, and the continuously lowered wages - Americans are finding it increasingly harder to even pay their monthly expenses. These are Americans that just a few years ago had no trouble paying their expenses.
They are victims of an economy that has been hardest on the middle class while continuing to enrich and favor the already rich.
The situation also means that many otherwise credit-worthy borrowers are stuck with subprime loans whose costs may rise, which could harm them financially and further tighten pressure on the U.S. economy.
Published December 3, 2007 by Lucy Belnora |
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| Tags:
Economy
Foreclosures
Middle Class
Mortgages
Predatory Lending
Sub-Prime Loans
Wages
