Is Anyone Still Doing Subprime Loans
| Subprime mortgage loans have triggered an economy collapse in the US, a phenomenon that has created ripples in several other major economies around the world. In brief, a subprime mortgage loan can be described as an adjustable-rate mortgage loan provided to customers having bad credit history. |
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Owning a home in the US is a dream that every American cherishes. During the housing boom, several lenders lured credit-impaired home buyers to 2/28 and 3/27 ARMs, by offering various attractive packages including fixed payments for the initial 2-3 years. Once the discount period ended, interest rates were adjusted to abnormal levels, as a result of which, borrowers were bound to pay twice the amount that they used to pay during the discount period. Unable to adjust to these changes and increase, millions of homeowners ended up defaulting on their loan payments and are now facing the risk of a home foreclosure and bankruptcy.
With the objective of providing protection to subprime borrowers and ensuring a discontinuation of such fraudulent practices, the federal financial regulators in the US have introduced new guidelines. As per these guidelines, it is important to verify the income, assets, employment and credit repayment history of all borrowers. Lenders are directed to provide borrowers with a reasonable period of time before adjusting the interest rates. Borrowers can utilize this time period to get their loans refinanced and are not required to pay any prepayment penalties. Loan repayment terms should be flexible and determined according to the applicant’s financial status and capacity to handle payments.
In spite of these guidelines, several lenders and mortgage brokers are still practicing subprime mortgage loans. This is due to the fact that the adoption of new guidelines in each and every state is going to take months. According to several real estate experts, it is important to make escrow accounts mandatory for all lenders. The only possible way to evade the risk of subprime mortgage loan is to resist the temptation of taking a loan. It is important to study in detail about mortgage loans before approaching any lender. One should shop around in order to obtain the best deal.
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Is Anyone Still Doing Subprime Loans