The American Dialect Society voted “subprime” the word of the year. Sharing this dubious honor with "subprime" are previous years' Word of the Year winners, such as (2005) truthiness; (2004) red/blue/purple states; (2003) metrosexual; and (2000) chad.
In this, its 18th year of heralding sparkling new entrants into the public lexicon, American Dialecticians said "Subprime is an adjective used to describe a risky or less than ideal loan, mortgage, or investment. Subprime was also winner of a brand-new 2007 category for real estate words, a category which reflects the preoccupation of the press and public for the past year with a deepening mortgage crisis."
The Society also created a NEW CATEGORY: REAL ESTATE/MORTGAGE/LOAN WORDS—
These include :
Exploding ARM An Adjustable Rate Mortgage whose rates soon rise beyond a borrower’s ability
to pay.
Liar’s loan/liar loan Money borrowed from a financial institution under false pretenses,
especially in the form of a “stated income” or “no-doc” loan which can permit a borrower to
exaggerate income. 1
NINJA No Income, No Job or Assets. A poorly documented loan made to a high-risk borrower.
34
Scratch and dent loan A loan or mortgage that has become a risky debt investment, especially
one secured with minimal documentation or made by a borrower who has missed payments.
Almost half of subprime ARM loans are concentrated in a handful of states, which are expected to suffer increasing foreclosures as the loans reset to higher rates. This data is culled from reporting by Noelle Cox at USA Today.
Top states for percentage of nation’s subprime ARMs:
California ... 17.3 percent
Florida ... 12.3 percent
Texas ... 5.7 percent
Illinois ... 4.9 percent
Arizona ... 4.3 percent
Michigan ... 3.6
New York ... 3.5 percent
Today In The Right Place, I wrote about the Midwest Fed's Outlook for 2008. There's some good news and sobering news. You can download the power point of William Strauss'
presentation.
I write today in the business section that the reported Bush administration freeze on mortgage interest rates might not be the best course of action for some Chicagoans. Chicago Housing prices peaked midyear 2005 according to the S&P/Case-Shiller Index and have tumbled 15% since. Homeowners who already owe more on their mortgages than their homes are worth might find themselves deeper in debt if they wait and if home prices continue their downward tumble.
t’s not the favorite of many readers - we heard from you. But t
The National Training and Information Center— based here in Chicago — is expected to announce recommendations for working with Wall Street investors to keep people in their homes. These and other recommendations will be announced at the NTIC Housing and Banking Summit this week. Activists and others have been meeting over the past several months to develop these recommendations.
It's part of the 30 year anniversary of the Community Reinvestment Act.
In March we wrote about how the CRA had unforeseen consequences: banks were buying and selling portfolios of mortgages made in neighborhoods simply to get CRA credit - You can download that story here.
An analysis by Chicago's Woodstock Institute of subprime lending patterns in metro Chicago suggests the percentage of troubled loans held by real estate investors -- those buying real estate for speculative purposes or as rental properties -- was about 9 percent in 2006.
"We mapped the percent of mortgages that were on non-owner-occupied properties in 2006, and it was 9 percent," said Geoff Smith, research director at the Woodstock Institute. "Those are loans on nonowner-occupied mortgage units. It could be an investment property. It could be rented out."
The U.S. Conference of Mayors has just issued a report detailing the potential impact that the projected 2.2 million in foreclosures could have on the economies of major metro areas. The mayors will be meeting in Detroit, one Midwest city particularly hard hit with foreflosure fallout from subprime lending.
The economic impact on Chicago was expected to be $3.9 billion, the report said.
We have written extensively about the subprime mortgage situation in Chicago in the Sun-Times Real Estate section. and the best place to look at our coverage is right here at The Right Place. Just click on the "Subprime Mortgages" category.
This week in The Right Place I write about how innovation always has its shadow side.
Don't delay! Make sure your property taxes and insurance costs are being escrowed because come Nov. 1 you could have a double whammy when you get your tax bill. and if you have an exotic mortgage -- whew, as I write today in The Right Place.
Last week in The Right Place I interviewed Elizabeth Warren, who has done extensive research into the bankruptcy behavior of Americans. Our spending behavior and our borrowing behavior is changing the very nature of homeownership.
Would you pay your credit cards before paying your mortgage? 40 million of us do.
On Friday, I wrote about a new book published by the Urban Institute, with the catchy title" Subprime Mortgages: America's latest boom and bust." Written by former Fed Governor Ned Gramlich, you can buy it here.
I also extracted data from the book to create a Homeowners Index, based on the wonderful Harper's Index. I haven't figure out how to link to it yet, but when I do, I will.
Last year, a finance professor I interviewed said that one of the most pressing question arising from the resets of 2/28 and other subprime mortgages is how the changes in the bankruptcy law would affect individuals facing foreclosures. Today the New York Times in an editorial shed some light on that question, and called for reforms to the law.
Here's a link, to the editorial. And here's an excerpt from the New York Times editorial....
The law’s perverse nature is even more evident if you read the fine print: The prohibition on modifying mortgage debt applies only to primary homes. Borrowers wealthy enough to own more than one home can restructure the debt on second or even third homes.
Before foreclosures climb any higher, Congress must reform the bankruptcy law. Legislators should reject the special protection for mortgage lenders by putting mortgages on the same footing as other secured debt. Doing so would help restore consumer bankruptcy to its purpose — to provide a safety net for borrowers who can’t repay their debts for reasons beyond their control.
A P.R. firm today sent out this announcement related to subprime mortgages and Chicago's neighborhoods.
The announcememt describes Faith Based Summer, which has been launched by NHS in partnership with Chicago clergy and Citibank — which has been a significant subprime lender through its subsidiaries.
Look for education workshops in South and West Side churches throughout June and July. Topics will
include getting ready for a mortgage, post-purchase counseling, and
foreclosure intervention, the release said.
Today, we had an excellent package of stories on mortgage rescue fraud, which is on the rise. Sandra tells the stories of two women who were snared and are fighting back; reports on a study that has found women increasingly are paying more than they should for their mortgages; reports on legislative solutions that are pending in Illinois; and offers suggestions for help if you find yourself in a bad situation.
State Senator Jacqueline Collins (D—Chicago) called the other day to say how glad she is that the Governor has changed the rules and reformulated HB 4050, The State of Illinois Predatory Lending Database.
“I am very passionate about engaging people on discussing financial literacy. It is an ongoing battle. This is not a panacea, but it did shine a spotlight on the problems (with subprime lending),” she said.
“There has to be some kind of financial literacy,” Collins said. “I was greatly appreciative of going through an 8 week session on homeownership. Let’s move forward and try to get the capacity for more counselors” and therefore reach more homeowners.
I haven't heard from the other side of the camp on this one, but all reasoned viewpoints are welcome here. Let's discuss.
We’ll be reporting on this and legislative approaches to subprime lending here and in the paper soon.
Meanwhile, you can read her letter, which might have appeared elsewhere, here.
We received the notice about the Neighborhood Assistance Corporation "bailout" yesterday. We're getting more detail. A knowledgeable friend raises a question : $1 billion at an average of $250,000 per loan = 4,000 houses, not enough to cover even the South Side of Chicago.
Funny, and I didn't see a mention of this at The New York Times. Let me know if I missed it in the print edition. ...
The NACA’s Chicago branch is at 1550 W. 88th St., call (773) 723-NACA and they are asking for people to go to their office at 2 p.m. on Saturday4/21.
The New York Times today had an excellent piece on what your options are if you have an adjustable rate mortgage that is resetting and you're not sure that you can make payments. It comes with calculators and other tools to help you decide what to do.
In The Right Place today, I write about the complex interface of the Community Reinvestment Act (CRA) with subprime lending. Scroll down to read it.
At the Rainbow PUSH event, I also spoke briefly with John Taylor, President and CEO of the National Community Reinvestment Coalition, about the Community Reinvestment Act and its interface with the subprime lending business. At the event, Taylor called for Federal intervention and for lenders to restructure loans in danger of foreclosure. When asked which regulatory agency should be held responsible for fallout from poor lending practices he said the Federal Reserve. Taylor also said that we can expect many more foreclosures in September, October, November.
I have also heard that the majority of the foreclosures will have originated by yearend 2008.
The Rev Jesse Jackson Sr on subprime mortgage tsunami
The latest national figure circulating puts 1.5 million homeowners facing foreclosure in 2007, a 20 percent to 25 percent increase over last year, research firm RealtyTrac says.
Woes in the subprime mortgage lending world are moving front and center in the political domain. In the past two weeks, Lisa Madigan offered her solutions, while new rules for HB 4050, Illinois’ predatory mortgage lending law were released. At the Federal level, congressional hearings occurred two weeks ago.
On Thursday, The Rev. Jesse Jackson Sr., took to the podium to discuss his views off what he calls the Mortgage Tsunami. I spoke with The Rev. Jackson in a private interview Wednesday about the subprime mortgage situation.
Freelancer Jacob Wheeler reported on the difference that homebuying counseling has made for Latino monebuyer'son Chicago's Southwest Side. Read Life on Mortgage Street
the date's changed again - sorry!
Here's my review from my column that runs in the Friday Chicago Sun-Times Real Estate section. I had somehow forgotten to post it given all the other data I posted!
No credit cards were used when making this film
March 2, 2007
BY SALLY DUROS Real Estate and Homelife Editor
Has the American Dream become the American Mirage because of the powerful debt industry?
The real problem with the role of a broker in the mortgage transaction is that the consumer might believe that the broker represents their best interest in getting a good deal when in truth the broker is being paid a premium by the lender for driving up the costs of the mortgage. Unscrupulous brokers will hide these expensive premiums from the borrower.
A little bit of news sneaked out of the Governor's office this weekend. The Governor has directed the llinois Department of Financial and Professional Regulation (IDFPR) to “immediately suspend” the Illinois Predatory Lending Database Pilot Program, also known as HB 4050.
We see some delight in the defeat of this bill on the part of bloggers that look at foreclosures as "investment" opportunities. I'll be interested to see what the grass roots say on this.....
This document from Housing Action Illinois explains what triggers the counseling in the affected zip codes and the procedure from there.
Housing Action Illinois is a statewide affordable housing coalition. It is a nonprofit member-based organization with 175 agencies, some of which are providing counseling for the program.
New data from RealtyTrac today showed that 3rd Quarter 2006 foreclosures in Cook County were double -- 12,000-- the volume from the same period 2005 - 6,000. There is some question as to how the data is collected, but the upward volume trend is clear, no matter where the data is from.
