Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners
Contributing Organization(s): Center for Responsible Lending
Author(s)/Creator(s): Ellen Schloemer; Wei Li; Keith Ernst; Kathleen Keest
Publishing Date: 2006-12-01
Issue Areas: Economic Development; Housing and Homelessness
Ownership/Rights Info: Please consult the copyright holder before using or repurposing this information.
The report discusses a number of factors that drive subprime foreclosures-these include adjustable rate mortgages with steep built-in rate and payment increases, prepayment penalties, limited income documentation, and no escrow for taxes and insurance. We also determine that these features cause a higher risk of default regardless of the borrower's credit score.
Our study also finds that recent high appreciation in many areas has masked problems in the subprime market, and that the cooling housing market will cause failure rates to rise sharply in many major markets. California, Arizona, Nevada, and greater Washington DC will be especially hard hit. Also in this report, we project lifetime foreclosure rates for 2006-originated subprime loans in each MSA in the United States.
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