Borrowers exploited
Thursday, August 30th, 2007
By Chris Fitzsimon
Duffy Gilligan gets it wrong in his Aug. 24 Point of View piece "The hope lenders offer."
First, it wasn’t just credit dregs (as Gilligan so kindly put it) who got subprime mortgage loans. Studies show that as many as 1 in 5 borrowers who could have qualified for prime loans were steered into subprime loans.
Second, most subprime borrowers were pushed into adjustable-rate mortgages with monthly payments that jumped 40 percent to 50 percent after two years — they were almost never told they could get a fixed-rate loan at a percent higher interest rate (about $93 per month on a $175,000 loan).
Third, borrowers who did improve their financial situations were prevented from refinancing into better loans because lenders saddled them with prepayment penalties. (more…)
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