Subprime Mortgages Are Coming Back in Style

Submitted by Jen Jones on Fri, 07/15/2011 - 7:13am

Subprime Mortgages Are Coming Back in Style

Everything old is new again with news that private investment firms are now lending to subprime borrowers again.

In fact, based on a Wall Street Journal report, subprime borrowers—home buyers whose credit scores do not meet the standards of banks—who had been largely shut out of the lending market in the years since the financial crisis, are now finding a much more liberal environment for getting a home loan. Apparently, as part of the deal, private investors are more willing to accept alternative forms of documentation as proof of income, opening up more average Americans to the hard-to-come-by benefits—and heavy financial burdens—of home ownership.

According the The Journal, “According to analysts, a handful of private investment firms have started making home loans to borrowers who fail to meet banks' requirements, which got tighter post-crash and have largely stayed that way. And for now they are holding them on their books, which is novel. At least two, Athas Capital Group, of California, and New Penn Financial, which is owned by Shellpoint Partners, of New York, are also making jumbo loans, or loans in most parts of the country that exceed $417,000, as the federal government appears to be scaling its support of that market.

These same buyers, with questionable credit, and the financial institutions that issued them mortgages, have received the majority of the blame for the real estate reckoning that caused the economic downturn, characterized by widespread defaults on subprime mortgages and a subsequent collapse in mortgage-backed securities.

As The Wall Street Journal writes, “Critics say the loans are similar enough to the subprime mortgages of old that would-be borrowers should beware. They often have a so-called balloon structure, which requires the borrower to pay the remaining balance after five or seven years, or to refinance. And they are expensive, with interest rates of as much as 13%, the loans can cost more than double the average for bank mortgages. "You'd have to be fairly desperate to take that in the current market," says Guy Cecala, publisher of Inside Mortgage Finance. Given the recent economy, that includes a lot of people.With housing prices still so relatively low, many people may want to buy, which analysts say could fuel a boom in this sector.”

Fortunately, this “boom” in subprime home buying is precisely the scenario for which bankruptcy was established. If you’re one of the many who’s fallen victim to predatory lending practices, and are having trouble making your mortgage, living in a home that is hopelessly underwater, and/or residing in an area that is currently devalued and an eyesore for the foreseeable future, bankruptcy can help get you back on the right side of the proverbial tracks: allowing you to surrender your biggest financial burden, negate your personal and financial liability, and move forward financially.

Don’t wait for your own personal housing bubble to burst (again). Join the millions of American homeowners who have found immediate help to keep (or escape) their hard-hit homes.

If you have been hit hard by the lingering housing crisis, knowing a qualified bankruptcy attorney can help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond our own “Great Recession.” The bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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