Two Million Homeowners Facing Foreclosure
A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households are likely to lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market.
The CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
CRL’s research suggests that risky lending practices have triggered the worst foreclosure crisis in the modern mortgage market, projecting that one out of five (19.4%) subprime loans issued during 2005-2006 will fail.
“In the subprime sector, the most vulnerable borrowers are sold the most dangerous loans,” said Mike Calhoun, CRL president. “At $164 billion, the losses from foreclosures could pay for the college educations of four million kids. For families who lose their houses because their loans fail, savings and economic security will be way out of reach.”
The report discusses a number of factors that drive subprime foreclosures — in the majority of cases, borrowers receive high-risk loan features, packed into an adjustable rate mortgage with a low start rate, that is approved without considering whether the homeowner can afford to pay the loan after the rate rises.
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Two Million Homeowners Facing Foreclosure
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