Subprime Loans Face Big Hikes

Christian Science Monitor reporter Ron Scherer published an article detailing the magnitude of the interest rate resets subprime borrowers are facing, the difficulties they will have in making their reset payments, and the potential implications of the impending delinquencies and defaults for borrowers, home prices and the subprime mortgage market.

The conclusion:

If the market for subprime debt returns, Kragenbring expects three major changes. First, loans will be for a fixed interest rate, not the adjustable version. ”It will help match the time people live in the house and the borrowers will pay less fees,” he says. Second, lenders will require much better documentation of income. Third, borrowers will be borrowing a smaller percentage of the value of their homes.

“It’s clear to me that in the future there will be different loan products and less leverage on the individual property,” Kragenbring adds.

You can read the whole thing here.


UPDATED: The article has been picked up by a number of other national news outlets; among them are: