20% Percent of Subprime Mortgages To Foreclose
20 percent of Subprime Mortgages To Foreclose
Foreclosures of subprime mortgages are expected to rise sharply in coming months, with nearly one in five subprime borrowers at risk, a consumer advocacy group said in a new report.
The Center for Responsible Lending, which is headquartered in Durham, N.C., said late Tuesday that some 2.2 million subprime home loans made in recent years already have failed or will end in foreclosure.
"These foreclosures will cost homeowners as much as $164 billion," the report said.
It also said that more than 19 percent — or nearly one in five — subprime mortgages originated in the past two years will end in foreclosure.
The center developed the projections after studying the default rates on 6 million subprime mortgages written between 1998 and 2004.
Subprime mortgages generally are written for families that have weak or blemished credit histories, and they typically carry higher interest rates than prime mortgages. Foreclosure occurs when a family fails to maintain payments on its mortgage and the lender moves to repossess the property that was used to secure the mortgage.
Mike Fratantoni, senior economist with the Mortgage Bankers Association, a trade group for the real estate finance industry based in Washington, D.C., said that the center's projections appeared "overly pessimistic."
He said that the study used a "very gloomy home price forecast," which assumes borrowers won't be able to sell their homes for enough money to pay off their loans. And, he said, the study "also assumes that borrowers who become delinquent won't be able to refinance or sell."
He noted that many buyers faced with foreclosure work it out, either by coming up with the money to pay the arrears or agreeing to a "workout" with the lender or by selling the house and paying off the mortgage.
The Mortgage Bankers Association most recent foreclosure data indicated that 1.05 percent of mortgage loans were in foreclosure, with the rate jumping to
3.86 percent for subprime mortgages.
The center in its study pointed out that losing a home had a huge financial impact on a family.
"The loss of home equity is significant because, for most families, the value of this ownership is their greatest financial asset," the study said.
It said that the situation was worth watching more closely because an increasing number of the mortgages written in America are in the subprime market.
The study added, "Our data show that cities in California, Nevada, New Jersey, New York and Michigan as well as the greater Washington, D.C., area can expect a high rate of subprime foreclosures."
The center called for making sure all borrowers have the means to repay their loans; ensuring that brokers, lenders and appraisers abide by prudent underwriting practices; and setting up programs to help borrowers who are in danger of losing their homes.
© 2006 Associated Press.
Foreclosures of subprime mortgages are expected to rise sharply in coming months, with nearly one in five subprime borrowers at risk, a consumer advocacy group said in a new report.
The Center for Responsible Lending, which is headquartered in Durham, N.C., said late Tuesday that some 2.2 million subprime home loans made in recent years already have failed or will end in foreclosure.
"These foreclosures will cost homeowners as much as $164 billion," the report said.
It also said that more than 19 percent — or nearly one in five — subprime mortgages originated in the past two years will end in foreclosure.
The center developed the projections after studying the default rates on 6 million subprime mortgages written between 1998 and 2004.
Subprime mortgages generally are written for families that have weak or blemished credit histories, and they typically carry higher interest rates than prime mortgages. Foreclosure occurs when a family fails to maintain payments on its mortgage and the lender moves to repossess the property that was used to secure the mortgage.
Mike Fratantoni, senior economist with the Mortgage Bankers Association, a trade group for the real estate finance industry based in Washington, D.C., said that the center's projections appeared "overly pessimistic."
He said that the study used a "very gloomy home price forecast," which assumes borrowers won't be able to sell their homes for enough money to pay off their loans. And, he said, the study "also assumes that borrowers who become delinquent won't be able to refinance or sell."
He noted that many buyers faced with foreclosure work it out, either by coming up with the money to pay the arrears or agreeing to a "workout" with the lender or by selling the house and paying off the mortgage.
The Mortgage Bankers Association most recent foreclosure data indicated that 1.05 percent of mortgage loans were in foreclosure, with the rate jumping to
3.86 percent for subprime mortgages.
The center in its study pointed out that losing a home had a huge financial impact on a family.
"The loss of home equity is significant because, for most families, the value of this ownership is their greatest financial asset," the study said.
It said that the situation was worth watching more closely because an increasing number of the mortgages written in America are in the subprime market.
The study added, "Our data show that cities in California, Nevada, New Jersey, New York and Michigan as well as the greater Washington, D.C., area can expect a high rate of subprime foreclosures."
The center called for making sure all borrowers have the means to repay their loans; ensuring that brokers, lenders and appraisers abide by prudent underwriting practices; and setting up programs to help borrowers who are in danger of losing their homes.
© 2006 Associated Press.
posted by Bob at Saturday, December 23, 2006
1 Comments:
The more people that lose their homes the better a far as I am concerned. People of St. Paul want to act so self rightous about others losing their homes and getting kicked to the curb, le tthem see how it feels to lose one of the few things in life that really mean anything.
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