Subprime Loans Save Lives
By Marc Savage
You see something on Subprime loans each and every day. Someone else is in a subprime loan that is about to go into foreclosure. Delinquency on subprime loans keep going up and on and on.
People seem to forget that sub prime loans serve a very valuable purpose in the market place. Yes I would agree that many lenders lost sight of prudent underwriting standards. And with the real estate boom loan officers would write any loan a bank would let them close as long as they made a commission.
Let me give you a prime example of why subprime loans are such an important part of the mortgage market. I had a client come see me the other day. This client was in a Chapter 13 bankruptcy.
A Chapter 13 bankruptcy means that this person restructured his debt and is now paying the bankruptcy trustee monthly payments until the bankruptcy plan is complete.
Anyway, when this client came to see me he was struggling to make his bankruptcy payments and his mortgage payments. His bankruptcy payments were over 1300 and his mortgage payments were 3937.
Statistics show that 67% of Chapter 13 Bankruptcy plans never get completed. That s because the trustee figures out how much money you can pay to get the Bankruptcy paid off as fast as possible. The trustee is not looking to make it so your payments are easily affordable.
So this client had been late on some of his payments to both the bankruptcy trustee and the mortgage company. I was able to find a subprime lender to not only do this loan for them but lower their total monthly payments by 1261.
Now he can easily make their mortgage payments. He is out of bankruptcy so every dime he makes or spends is not examined by the court and trustee. He is able to move on with his life.
Yes his subprime loan is a higher rate than a conventional loan. But there was no conventional loan available to him. Yes he is in the dreaded 2/28 loan, but as long as he makes his payments on time he will be able to refinance into a conventional loan in 6-12 months. That is long before their 2/28 adjusts.
So the 2/28 which is viewed as the worst loan ever created by the mortgage industry was able to help a homeowner in need. You ask my client if the subprime lending industry is evil or if it was able to help him save his families home!
Marc Savage is a Nationally Recognized Mortgage Expert and Host of Your Home Your
Money on AM 540 WLIE Saturday Morning at 10AM. Marc specializes in helping
homeowners who have had a bankruptcy or other credit challenge find payment relief,
achieve financial security, restore their credit and receive peace of mind.
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