Abusive and predatory lending practices are a serious problem for our nation’s communities. Because of abuses in the subprime market, families are losing their homes and savings, foreclosure rates are higher, and some neighborhoods face increased vacancy rates. Empty neighborhoods, or those where the majority of houses are for sale, can be perceived as blighted. This leads to declining prices and inevitably devastates the strength and stability of those communities and the families who live there.
How Did This Happen?
During the real estate boom, many lenders originated risky mortgages with floating interest rates and weak underwriting standards. While some in the media may have over-dramatized the situation, a number of subprime lenders that made problematic loans have gone out of business, and the delinquency rate for subprime loans at the end of 2006 was more than 13 percent–4.5 percent are in foreclosure.
Subprime Lending Does Have a Legitimate Role
for Many Borrowers
While abusive lending does occur primarily in subprime markets, not all subprime loans are abusive or problematic. In fact, responsible subprime lenders have played an important role in helping millions of consumers achieve homeownership. NAR supports federal legislation and regulation that prevents predatory lending while maintaining a role for responsible subprime lending.
Education is Key
REALTORS® believe that financial education is an important defense against abusive lending practices. NAR and its partners have issued a series of consumer education brochures. They emphasize the importance of understanding the different types of available mortgages, explain how to avoid the pitfalls and entrapments of predatory loans, and suggest what homeowners should do if they are concerned about their mortgage or foreclosure.
Consumers who need immediate advice should call 888/995-HOPE, or visit www.995hope.org.
