The Wall Street Journal has begun a series on debt, the first article of which is about subprime lending in an area of Detroit. In 2006 over a billion dollars went into subprime loans in 22 zip codes in that city; this represented more than half of all the home loans made that year in those areas.
What was new to me was that almost half of these subprime loans were made not to home buyers but to those who already owned a home - some for 20 years - and wanted to get some 'easy' cash. I've said for a while that not everyone should be a homeowner; it may be the American dream but not all dreams are realized. But when someone who has attained the dream and owns a home for many years succumbs to the blandishments of a mortgage broker or the need to impress his neighbors, that person is just plain stupid particularly when almost anybody could see that Detroit was not likely to be experiencing an economic rebirth soon.
While some claim that almost 2,000,000 were able to become homeowners because of subprime loans, the story is not over. Others estimate that before this is over, 2,400,000 will lose their home.
1 comment:
Hi Al :)
I happen to know a family with a subprime loan. For 15 years they have been paying $2500/month for someone else's mortgage. They felt that no matter the cost or the terms, they HAD to get into their own home. They don't plan on moving, and don't care if they become rich off of the equity. Just knowing that their money is going into THEIR equity makes them smile every month. If, perchance, they lose the home, they don't feel any worse off than if they had been renting. In fact, they feel that it's been a great experience. Not everyone who went for a subprime loan was out to take advantage of someone else. Pete Costas
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