What do you think of when someone dares to utter the words Subprime Mortgage? According to this article in the New York Times, so-called subprime mortgages are inching their way back into the market. But this may not be what you assume.
A huge percentage of folks were adversely affected (and let me point out, involuntarily) by the economy implosion that is all to fresh in our memory; job losses, salary reductions or forced relocations, along with the resulting bankruptcies and foreclosures, short sales due to plunging prices via a bursting real estate bubble. Consequently, job security vanished and credit scores were trashed. These are the people who would now fall into the “subprime” category. Are these folks unworthy of owning a home?
And something else to ponder. Was the collapse of the mortgage market all due to the subprime loan? Without the unbelievable number of jobs that were lost, most defaults would never have happened, so I think not. The definition of a subprime mortgage is simply one that falls outside the parameters of “prime” as set by government agencies, Fannie Mae and Freddie Mac. The lines drawn by FNMA and FDMC are not arbitrary by any means but there is no human element, no consideration of circumstance. Other, far more risky (one might say stupid) loans led the pack in the mortgage market debacle like no-doc financing (no proof of income or credit whatsoever) or interest-only payments where the principal remained at 100% until due in a balloon payment at the end of term.
From my point of view, without some flexibility and alternative choices to the “prime” mortgage market, we’re on the verge of locking ourselves in a dangerous, downward spiral. Your home will be increasingly difficult to sell, the residential building industry will remain stagnant with a trickle-down effect that will further injure our job market, rents will increase (and I’m seeing this already at a ridiculous rate). Does this not smell like another recession to you?
Subprime is merely semantics. It’s a word. Get over it and move on.
