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The subprime crisis train kept chugging while I was focusing on public transit this week — here are a few stories I came across.
Here’s a bit from a Reuters story from Monday, “U.S. Subprime Crisis Exposes Mortgage Scams:”
Gabriellee Cunningham had fallen behind on the mortgage on her modest suburban Miami home and was mired in debt when she was approached in June by a door-to-door “mortgage lender” who promised to help her.
Nine months later, her $89,000 mortgage has ballooned into a $234,000 loan, her monthly payments have doubled and she faces foreclosure on a house she no longer owns.
Housing officials call Cunningham the victim of one of the worst cases of predatory lending they’ve ever seen and warn, as the U.S. subprime mortgage crisis grows, of a rising tide of scams in which homeowners are being cheated out of their home equity. …
Consumer advocates have seen a surge in “foreclosure rescue” and “equity stripping” scams in recent months as the subprime mortgage crisis developed.
Bloomberg reported yesterday that California Attorney General Jerry Brown has an “active and open investigation” into the collapse of the subprime mortgage industry in the state, including predatory lending practices.
I thought these numbers were striking:
Half of the 20 biggest U.S. subprime lenders, including No. 2 New Century Financial Corp., which is trying to avoid bankruptcy, are located in California, according to the newsletter Inside Mortgage Finance. The industry is under scrutiny by regulators after delinquencies on subprime mortgages rose to 13.3 percent last quarter, the highest since September 2002.
About 13 percent of the U.S.’s subprime loans are in California, according to the Washington-based Mortgage Bankers Association. Mortgage industry analyst Bob Visini of First American Loan Performance said that 13 percent accounts for 22 percent of the subprime mortgage debt in the U.S. because California is the nation’s most expensive real estate market.
Here’s an AP story showing late payments rising on car and home equity loans:
Late payments on certain auto and home equity loans climbed in the final quarter of last year, while delinquencies on credit card bills largely held steady, suggesting some consumers are feeling more squeezed than others.
The American Bankers Association, in its quarterly survey of consumer loans, reported Thursday that late payments on home equity loans rose to 1.92 percent in the October-December period. That was up sharply from 1.79 percent in the prior quarter and the highest since the first quarter of 2006.
Finally, I spoke yesterday with KPBS’s Tom Fudge on the These Days morning show about the topic, with fellow guests David Maiolo, the mortgage broker whose insight you’ve read a few times in my stories on the industry, and real estate financial analyst and broker Mark Goldman.
Maiolo and some of his colleagues have recently started the Fair Lending Alliance, a self-policing accountability group for brokers. We took a few questions from listeners, too. You can listen to the archive of that show here.