Subprime, a Result of Predatory Lending

The ad said, “Easy Financing. Low FICO scores no problem. Stated Income only.” What a deal.

It doesn’t take much imagination to picture the chain of events leading to the ultimate conclusion...Foreclosure, based on Predatory Lending. There has been a landslide of financing in a spectacular unprecedented market. Everyone was willing to take any steps necessary to capitalize on a spectacular scenario.

And finally...a new headline:

"All predictions are that we are facing a tsunami of default and foreclosures in the subprime market as homeowners face steep increases in their monthly payments and housing values remain flat, making refinancing virtually impossible," said Rep. Carolyn Maloney, D-N.Y.. Maloney is vice chairman of the Joint Economic Committee and chairs the House Financial Services Subcommittee on Financial Institutions.

Hearings are being held by the Financial Services Committee, examining predictions by the Center for Responsible Lending , concerning default and foreclosure results, which have been extremely negative. It is thought that these findings are based on ‘unrealistic, worst-case assumption,’ said Mortgage Bankers Association Chairman John Robbins. Robbins contends that RealtyTrac is a company that specializes in marketing foreclosed properties, and overestimates the number of foreclosures by roughly 30 percent.

Well, it’s not as bad as it seemed after all. But tell that to the individuals who’s homes are facing bankruptcy. And tell the ‘good news’ to the once greedy, profitable lenders, many of whom are suddenly out of business.
Some sleigh ride. The effects are still being reviewed by the feds, as the real estate market of yore, settles into a degree of normalcy once again. No more flipping. No huge overnight equity gathering. Just average real estate sales, with average real estate profits. And loans based on good FICOs and income. No surprises.