Subprime Loans "Pose Unknown Level Of Risk"

Broderick Perkins, who writes at Realty Times, is a thoughtful fellow in this wild housing market. He tends to focus on the impact of the price boom as much as any RE columnist. This report covered a conference that discovered the lending spree is fueled by the mortgage industrys' desperate attempt to extend the boom.

"While there have been interest-only and negative amortization loans in the prime sector for years, the presence of these types of loans in the subprime realm is largely the market's response to increasing borrower affordability and to maintain origination volume." said S&P's Susan Barnes.

Readers of this blog have heard this before, "The loans themselves pose a greater risk because they cost more or defer costs or both. The subprime market has also spawned growth in predatory lending, purposely presenting lower income, minority, older and less-informed, borrowers with loans they can't afford."

"If a time arrives when there are too many risky loans and the economy hits a recession many home owners could default on the American Dream and take the economy down with it."