Subprime mortgages are not the only villains in the current 'mortgage mess' and 'housing slide.'
Frequently left out of the media hype are home equity loans. Home equity lines of credit and second mortgages
Key problems:
(1) Homes with equity loans and lines of credit frequently have total liens at 95% - 100% of house value, leaving no wiggle room for stressed and distressed borrowers.
(2) Prime and Alt-A mortgage lenders often do not know about these seconds and equity loans/lines because they are in different departments that often do not communicate. Lenders without subprime loans may simply have shot themselves in the other foot.
(3) According to April 2, 2007 issue of Businessweek, homes with seconds and equity loans/lines are 43% more likely to go into default.
(4) As homeowner's available equity dwindles, it may affect consumer spending and contribute to further economic decline.
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2 comments:
Wow, 95% wiggle room is dongerous to the borrower!!! What would you suggest a borrower do if they need money NOW...should they use their real estate and if so how?
Confused Cathy
Confused:
If you need money now, most folks have two options (1) sell -- but not always possible, (2) get a second job -- no one likes to hear that, or (3) take on a boarder... no one wants to hear that either.
When you really need money, it seems none of your options are good ones.
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