Lenders May Pay For Pushing Subprime Products
It is always interesting to see what news comes out after trading is over on Friday. In this case Reuters has a report that subprime lending is coming under scrutiny. "After a government report suggested that lenders were steering minorities to pricier home loans, Attorney General Eliot Spitzer said last week his office would look into how lenders set fees and rates on home loans."
These loans put people in overpriced homes they can't afford and represent an industry desperate to keep mortgage volume from eroding further. "The risks of lending to less credit-worthy borrowers include a chance that such loans will not be repaid, which has some analysts asking why banks venture into sub-prime lending."
"'These banks should get out of this business ... (but) they're attracted to the high yields these loans provide,' said Dick Bove, bank analyst at Punk Ziegel."