News & Updates

WE'RE NOT IN THE CLEAR– YET

By Paul L. Warner – As published in Scotsman Guide's Residential Edition, February 2008.

It has been many years since the United States has seen a major downturn in the housing market such as the one taking place today. The U.S. Office of Thrift Supervision predicts that between $300 billion and $680 billion of adjustable-rate mortgages with teaser rates from the boom era of 2000 to 2005 will reset to higher rates this year and nonprime borrowers hold about 73 percent of them. Cleary, the market still has issues ahead.

The optimistic prediction is that the market will be stable and hopefully not get any worse this year. If this does become a recession year, housing will be the principal culprit. This has less to do with losses on mortgages themselves than with ... Read More

WHAT ARE SUB-PRIME LOANS?

Undoubtedly, you’ve been hearing a lot about sub-prime mortgages in the news these days and possibly wondering what all the fuss is about. Sub-prime loans are high interest loans to borrowers who do not qualify for conventional loans because of the poor credit history. Sub-prime is risky for both lenders and borrowers due to the combination of high interest rates, poor credit history and adverse financial situations usually associated with sub-prime applicants. Typically, as economic growth slows the default rate of sub-prime borrowers increases dramatically. This is what has been happening recently.

Lenders use the higher interest rates to offset the costs of higher collection defaults, repossessions and charge-offs. Sub-prime loans are controversial as some see them as simply preying upon those with poor credit while others see them a necessary since they may be the only way for some to purchase a car or home.