Upside Down Mortgage

How Did Subprime Loans Start

Question: Who's responsible for the mass number of recent and upcoming home foreclosures?

A significant number of people that don't qualify for traditional home loans accept subprime loans to get into a home of their own, often without understanding that their mortgage will jump dramatically.

Lenders, on the otherhand, are making loans to people that can barley make the starting mortgage and will find it almost impossible to make the payment once the mortgage increases.

Many people got into these loans with the expectation that the value of their home would increase and they could refinance, but in the current cool market it's nearly impossible to refinance.

Again, who's to blame? A person for taking the loan they can't afford or the lender that knows that the family will probably lose the house?

Answer: Human nature is too always want more than you can afford. The big mortgage lenders can approve or deny home loans based on the buyers credit, but if they deny they risk losing the mortgage to a competitor. The last 10 years has been a free for all in the mortgage/real estate markets for lenders. If you breath, you'll get approved. The creative ways they are financing people also hurts, like interest only loans. The lenders could care less if you make your payments in hot real estate markets. Basically they can turn around and sell the house at auction after forclosure and still turn a profit.
Problem is recently the real estate markets are soft, and people who couldn't make payments - can't refi, and lenders are getting stuck.

My answer is both, the buyer and the mortgage lenders. It's good old capitalism at it's best.

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