What is the situation of the subprime mortage crisis today?

Question

I need to know because I'm sure my boss (which is coming from Europe) will ask me and I'm an engineer so I do not know anything about this...he just wants to know anything in laymans terms...

Answer 1

Well basically it's a shambles. Thanks to the layed back, predator and anti-qualification lenders in the US....it's like Sep 11 all over again but from a financial perspective.

The once strong mortgage backed securities are now or nearly worthless to the millions of individual/commercial investors because the mortgages were held by persons who were incappable of servicing them.

The sub-prime applicants, those with poor credit scores/histories were able to secure large mortgages for >$300,000 and they were often enticed by no or low teaser rates. Where the monthly payment was very low and affordable but once that expired in 1-3 years the monthly payment became huge and they couldn't afford it anymore.

Same for car loans and personal loans.

So this caused loss of money all around. You need money to pay your employees....so that's job loss and company close down everywhere.

Even though interest rates are the lowest they've been for many years homeowners still can't afford it. They're just packing up, declaring bankruptcy and renting or shacking up with someone.

Answer 2

there are few true sub-prime lenders any longer and getting fewer by the day. Most will only lend to a max of 75% of the homes value and teh rates are high like 10% -12%

I am a mortgage banker in TN & KY