A Reuters
article quotes U.S. Senator Christopher Dodd, who says mortgage lending practices are "out of balance", and that borrowers in the subprime market need to be protected. Subprime mortgages are loans that are available to those with lower credit ratings, but usually at higher interest rates. There are an increasing number of lenders in this market; however, the lenders have not always done well, despite the pressure to put people into larger and larger loans.
Senator Dodd indicates that homeownership is under attack from greedy lending practices undertaken by the large number of
subprime lenders.
His comments are not surprising, given the current statistics on foreclosure. According to
RealtyTrac, a marketer of homes in forced sale, foreclosures were up a whopping 42 percent in 2006.
At the same time, we're seeing rates on
standard mortgages go up and subprime lenders under a lot of pressure as a result, with some going out of business. So the predatory practices are not paying off.
If you have less than stellar credit, do not allow yourself to be talked into a larger mortgage so that you can "take that vacation" or "get that car". Get yourself informed by checking out our section on
Bad Credit Mortgages. While the mortgage loan may often be a lower interest rate than a car loan, you are also hooking yourself to a debt that will take you 20 or 30 years to pay off. While buying a home is a positive step, it only works if you can afford it. Get impartial, unbiased advice from a credit counselling agency or other financial professional if you have any questions about whether you can afford what you are buying or not.
Michael Chantrel