From over the weekend...
According to Nightly Business Report, in Anacostia DC, nearly one of every seven loans is subprime loan. You can watch the video clip under tonight's (Friday) program. Maybe this shouldn't come as a surprise, given the fact that the low to moderate income and minorities borrowers are not on lenders' "A" category list. Not only that these folks probably might have also been targeted for predatory lending. It's double whammy for them!
What is a subprime loan? Via Washington Post.
A subprime loan is generally made to persons who cannot qualify for a traditional mortgage. According to a recent study issued by the Federal Reserve Board, "The subprime category of residential mortgages includes loans made to borrowers that displayed one or more of the following characteristics at the time of loan origination: weakened credit histories stemming from payment delinquencies, charge-offs, judgments or bankruptcies; reduced repayment capacity as measured by credit scores or debt-to-income ratios, and incomplete credit histories."
If more subprime borrowers are forced to go foreclosure routes -- it's going to affect D.C. government tax base. Because every one of the borrowers contributes to DC's tax coffer.
The trouble does not only hit the District, but also spills over across the river to Fairfax County. According to Urban Land Institute, via Examiner, "Fairfax county had the second-highest number of subprime mortgages in 2004."
Fairfax? Last I read, Fairfax has a median income of $94,610 (second only to Loudoun) -- now.. this-is-shocking! Via Examiner.
Urban Institute Senior Research Associate Peter Tatian said in more affluent communities like Fairfax, homeowners overextend themselves by using subprime mortgages to borrow against the value of their house for renovations, or to upgrade to bigger homes.
“Many folks are relying on subprime loan refinancing,” he said. “It wasn’t a good option to begin with, but it was some way to raise money.”
Prince Georges county, is another county that might have problems with subprime loans. As they say, you ain't see nothing yet. The trouble with the loans, may also affects the financial services industry. Via The Ground Floor.
As the saga unfolds, its impact grows. Take a look at today's articles in the financial press where they discuss the number of money market mutual funds which had invested in securitizations containing sub-prime loans as a way of juicing up their meager yields.
The subprime loans saga won't go away anytime soon, because there's even a website dedicated to tracking the number of lenders that have gone kaput! (Hat tip to The Ground Floor)
To close, here's what Stephen Colbert has to say about subprime mortgages....
