The Nation: The Subprime Mortgage Blues

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The Subprime Mortgage Blues
Nicholas von Hoffman


Anybody who knew anything shook their heads while the politicians and the bankers and home builders boasted. The boast was that almost three-quarters of American households were homeowners.

Anybody who knew anything knew the reason was all you had to do to get a mortgage was to show the loan officer that your body was warm. Can't afford a down payment? Don't worry about it. You've got an abominable credit rating? So who's looking? You don't have a dime in the bank? We don't ask embarrassing questions. We just hand out loans.

This is what they call the subprime mortgage market, where in the last few years 6 million bad risks have gotten the financing they needed to buy a house. No banker in his right mind would make such a mortgage, but for the last few years the sane bankers have been hiding under their desks or have left for the grocery business.

As long as housing prices were jumping higher almost by the hour, the subprime mortgage holders pretty much managed their monthly payments, although there are stories out there in real estate land of people missing their first payment on a no-down-payment mortgage. People who ran into trouble could refinance the house and cover their payments that way, something that ceased to be possible when house prices went flat and began to move downward.

Other subprimers ran into trouble when the period of the introductory teaser interest rates expired and their monthly payments jumped by hundreds of dollars, which they did not have. Official figures do not exist, but it appears that somewhere between 15 and 20 percent of subprime mortgages are behind in their payments. That works out to a lot of people, a lot of families and a lot of money. ......(more)

The complete piece is at: http://www.thenation.com/doc/20070319/howl