Subprime Crisis DeepensIf financial analysts are right, just over 2 million homeowners are at risk to default on their mortgage loans, according to an article on CNN.com. High foreclosure rates are a real possibility.
In some cases, an area could be devastated by foreclosures -- especially where areas have a very high rate of subprime mortgages. The top 10 subprime metro markets all have subprime loan rates at 20% or more of mortgages. Unfortuately, even a single foreclosure on a street can depress the home values all around it. With a large number of subprime foreclosures, there could be even more downward pressure on housing prices as whole neighbourhoods tumble in value.
Of course, this would also contribute to a growing glut of houses on the market.
How bad is the subprime lending market? Well, I'm still tracking the Implode-O-Meter; this website has been specifically focusing on the woes of subprime lenders for about 4 months now. The number of lenders now listed as "kaput" in that short time span is 42.
For those of us who are fans of the Hitchhiker's Guide to the Galaxy, you'll know that 42 is supposed to be the answer to everything. However, in this case, it's the answer to whether the lenders are ailing, and the answer is yes.
Some folks have actually been put in subprime loans when they could have qualified for prime. Could that be you? Get to know your credit score, and be sure. It could help a lot when you next go to negotiate with a lender.
In the meantime, the good news is that the Fed is making noises about lowering interest rates. If you are in an ARM, it may not be fast enough for you; however, if your ARM doesn't reset before the fall, you could get a break on the rate.
And if rates drop, it could even be time to look for another lender. If so, check out a few of our sponsors -- it's free to get a quote, and you might just find yourself a much better rate.
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