High risk sub-prime mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to more affluent suburban areas.
A report by The Wall Street Journal indicates that from 2004 to 2006, when home prices reached record highs in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most sub prime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.
While sub-prime mortgages may have typically been thought of as an offering to those with low incomes or spotty credit the actual data contradicts common assumptions. High rate lending also rose sharply in middle class and wealthier communities as well. Many saw the mortgage packages offered as an answer to rising prices.
Wlth real estate prices rising, aggressive lending, and relaxed credit standards many got into homes that they really could not afford thinking that they could sell or refinance later. Now, with prices failing and credit tightening many are ready to walk away from their homes as they face foreclosure.
Adding to the problem many were offered second mortgages or piggyback loans that were used to cover down payments.
Loans to speculative real estate investors have added to the problem as well such properties are at a higher risk than a primary residence.Believe it or not many current renters are in danger of foreclosure as eager investors can no longer make payments.
Due to the fact that many lenders were not required to report pricing details until 2004 many may not know that they are in potential trouble. With billions of adjustable loans set to adjust thru 2008 there seems little end in sight.
How to Help Solve the Foreclosure Problem<
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