Low Credit, No Credit – Subprime Mortgages

The average, every day person, unfamiliar with the housing industry in specific and economy in particular, is shell-shocked by the continual decline of both, now being called the "subprime mortgage crisis". What's the secret recipe for the economic and real estate decline?

Credit
Most, if not all, of the economic decline can be traced back to credit and the desire of Americans to own material wealth. This is not a problem in and of itself. The problem starts when people over-extend themselves to get what they want.

Corporate America has only helped to build up to this point, offering low credit deals. A subprime mortgage is an excellent example, as well as the main reason for the housing crisis.

What is a subprime mortgage?
It used to be that lending companies had a set of criteria, based on guidelines laid out by Fannie Mae and Freddie Mac, the leading providers of funding for home mortgages. If you didn't meet the criteria, you didn't get the loan.

Subprime mortgages, however, are for those people that don't meet the normal criteria:
• Ability to make the down payment
• Income level
• Employment status
• Credit history

Subprime lenders allow people that are considered high credit risks (those that don't meet the criteria) to apply and receive loans at higher interest rates. While being a subprime lender is risky, it also brings high rewards if the borrower makes their payments.

Because of those rewards, lenders offered more loans to high-risk borrowers, with bigger deals. One such deal was a "no income, no job, no assets" loan. Another is the interest-only ARM, in which the borrower only pays the interest for a set amount of time.

The deals worked. In 2005, the average down payment for first-time buyers was 2%; 43% were making no down payment at all. By 2006, 20% of all mortgages were subprime, with an outstanding amount of $600 billion.

However, most borrowers were considered high-risk for a reason. By May of 2008, 25% of the subprime mortgages were either 90-days delinquent or in the process of foreclosure. The unbelievable part is that most subprime lenders, if not all, were aware of the complications this might cause, and chose to ignore it.

Now
Whether the crisis will continue or not is hard to foretell. Some say things are getting better, others say, "Don't count on it". One thing is clear - subprime mortgages are a thing of the past.

Now, more than ever, lenders are willing to work with borrowers to avoid foreclosure. Some have gone so far as to freeze foreclosure proceedings for a certain amount of time. Unfortunately, it may not be enough for those borrowers with subprime mortgages.

There's hope, however. If you have a subprime mortgage, talk to your lender about refinancing, or subprime loan modification. In addition, don't forget there are other places you can look for help. HUD or FHA are good places to start, as well as investigating the Hope Now Alliance (government and private industry helping certain subprime borrowers).

Having a subprime mortgage does not automatically mean you'll end up in foreclosure. Many government, public and private institutions are willing to help. Search, learn and educate yourself!



Visit us at:

http://www.7dayloanmod.com
Troy Fullwood is an award winning speaker, self made millionaire, educator, and coach. He has presented keynote speeches, workshops, and seminars throughout the United States. His high quality, high content, high energy programs are well researched and delivered in a down to earth style that everyone will remember.articlepostrobot.com}}} . David also has a directory submission service.