Monday, March 26, 2007

Subprime Fallout

Home Owners vs. Banks Financially-strapped and bankrupt home owners are pointing the finger at banks and mortgage brokers for selling them on the idea of subprime mortgages. Doug Duncan, chief economist for the Mortgage Bankers Association in Washington, D.C., acknowledges that in some cases aggressive lenders obscured facts and made loans that borrowers couldn't afford. But he, like other lenders, says it was the responsibility of borrowers to read and understand what they signed.About 50 percent of the subprime mortgages were "stated income loans," with no verification of borrowers' incomes, says Paul Leonard, director of the California office of the Center for Responsible Lending.Last year, the Mortgage Asset Research Institute sampled 100 such loan applications and reported that 90 percent listed significantly higher incomes for borrowers than they had reported on their tax returns."Borrowers need to protect themselves and need to read what they're signing,” says Nick Larson, an assistant vice president at the Mortgage Asset Research Institute. “At the end of the day, bottom line, you can't stress this enough: The person who is signing the papers is committing themselves financially.

”Source: Associated Press, Alex Veiga (03/25/07)

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