Newspaper Article

Subprime Mortgage Industries Will Tighten Up

Harney, Kenneth

2007

Overview

  What's going on here? At a recent Senate hearing, a leading consumer-protection advocate, Martin Eakes, CEO of the Center for Responsible Lending, called the subprime market \"a quiet but devastating disaster.\" Eakes' organization published a study last month that estimated that 2.2 million overextended subprime mortgage borrowers will lose their homes to foreclosure - a projection hotly disputed by the mortgage industry. Eakes told the Senate banking and housing committee that subprime lenders have \"virtually guaranteed\" high levels of delinquency and foreclosures by offering borrowers excessively risky loans with teaser rates and low payments for the initial two or three years that later explode into sharply higher payments. Lenders also have allowed unqualified borrowers to merely \"state\" - not verify or document - their incomes, putting large numbers of them into loans they should never have been granted, said Eakes. He quoted industry research that found that 90 percent of stated-income mortgage applicants \"had inflated incomes compared to IRS documents,\" and that 60 percent of them exaggerated their incomes by 50 percent or more.

• Publisher: Halifax Media Group
• Subject: Eakes, Martin