Subprime Times III

by (BPRW)

America is the land of opportunity. A place where the term “American Dream” applies to the reality that a hard-working individual can come from a background of no social standing and through dedication and drive, achieve success. This dream of prosperity and financial security goes too far however, when money is made at the expense of others, especially the more disadvantaged and vulnerable members of our society.

The current and on going subprime lending crisis can, in many ways, be seen as the haves exploiting the have-nots through unreasonable loans and the promise of a better life through ill advised purchases. To my understanding, mortgage brokers and loan officers are supposed to help families and individuals purchase homes and apartments within their means for the purpose of building wealth and stability. It is a tragedy that we now must throw around the term predatory lender as the business ethic once partnered with home ownership has been irrevocably broken.

A subprime loan is characteristically offered to individuals who don’t quality for loans from traditional lenders because of low credit ratings or other factors that indicate they might default on debt repayments. These loans are offered at a rate above prime or with higher interest rates than those offered on traditional loans, typically translating to thousands of dollars worth of additional interest payments for the loan recipient. The loan carries a low interest rate for the first two or three years, yet after this time period of affordability has passed, interest rates can increase every six months, carrying mortgage payments much larger than initially expected.

Due to unstable housing markets in several states, those not yet faced with foreclosure may find themselves owing large repayments for houses no longer worth even their initial purchasing price. Information provided by the U.S. Department of Housing and Urban Development (HUD) states that even upper-income African American neighborhoods reflect an inequitable amount of subprime loans granted. In honor of the “American Dream” we must hold predatory lenders accountable for their unsavory business practices as well as providing some sort of safety net for those unduly affected by the current subprime crisis.