Upside Down Mortgage

Subprime Rates

Question: Why did people take out subprime loans? Don't they know rates will increase some day? Save for down payment?

If they would have just saved up down payment money, they could buy a house cheaper now. Why are people so irresponsible?
When the market so high that most people cannot purchase a home without something like a subprime loan, they should know prices are ready to decline.

Answer: Being a lender and the financial adviser of schedule one bank I have declined many of these loans. In the same token if you consider the rent they pay, sometime that coincides with the mortgage payment and thus their thought process is why pay someone else's mortgage when I can be increasing my equity. Unfortunately when the affordability is not there it creates huge cash crunch and eventually to make their mortgage payments they wind up extending other credit facilities which wind up creating a huge downward spiral. with cooling down of the market the sale of their home in order to get out of the debt crunch becomes no longer an option. True they could save more for down payment but when the market was hot there was nothing that was affordable.

Wall Street - Chasing subprime highs with false expectations

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