| The Subprime Foreclosure Crisis: How Did We Get Here in California?
Over the last ten years, there has been an explosion in the availability of mortgage credit for low- and moderate-income families with less-than-perfect credit. In 2006, subprime originators nationwide made loans totaling $640 billion. Inside B&C Lending, “Top 25 Lenders in 2006" (February 9, 2007) The volume represents a twenty-fold increase since 1994 and a doubling just since 2003. One in every five home loans originated in 2005 was a subprime loan, growing to nearly one in four through the first three quarters of 2006. The sector has $1.2 trillion of mortgages currently outstanding. Inside B&C Lending, 9/1/2006; See also Inside Mortgage Finance MBS Database 2006 As shown in the figure below, in a short period of time subprime mortgages have grown from a small niche market to a major component of home financing.
MAIL BAG: Reverse mortgage pays as long as you're alive
Q: I have two questions about how senior citizen reverse mortgages work. (1) How are the monthly payments to the homeowner calculated by the reverse-mortgage company, and (2) what happens when the homeowner outlives the market value of his house? If that happens, does he continue to live in the house and receive monthly payments although the result will be a loss to the lender? -- Dale S. A. Each of the three nationwide reverse-mortgage lenders, FHA, Fannie Mae and Financial Freedom Plan, has a different formula to calculate payments to the homeowner. The age of the youngest borrower (you must be at least 62), the adjustable interest rate at the time of obtaining the reverse mortgage and the home's market value are used. To compare how much you can receive from each plan, on the Internet go to www.FinancialFreedom.com and enter your age and estimated home value.
Application for home loan can spur sale of your data
Home-finance companies buy applicant information from the nation's credit bureaus, which track and rate consumers' financial lives. A prospective lender checks an applicant's credit record by contacting a credit bureau, which records the inquiry and then bundles the applicant's name, address, phone number and credit score with that of other recent loan applicants, and sells the lot to anyone who will pay the fee. Because the loan application triggers an inquiry to the credit bureau, these lists of potential borrowers are called "trigger leads." They have become a hot commodity in the past few months, used by some lenders to drum up business in a slumping market, though they rile many borrowers. "Customers are getting mad at their lenders, asking, 'Why are you selling my data?' " said Amy Boyer, chief lobbyist for the Wisconsin Mortgage Bankers Association.
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