Subprime Lending and Foreclosures
Subprime lending has caused a huge mess in the real estate market, leading to thousands of homes being foreclosed on already this year. A subprime is a loan in which the lender does not verify the reported income, sometimes called “liar loans.” These loans are damaging not only the housing market, but also the overall economy as well. Subprime lending is also affecting the mortgage business, causing a credit crunch which is preventing some people who would normally be qualified from getting loans. The subprime loan industry has received so much negative attention for the problems that have resulted from subprime lending that a Senator, Charles Schumer of New York is proposing legislation that cracks down on subprime loans. Many lenders are scrambling to try to contain the crisis. Bank of America and Citigroup set aside over $1 billion to help those victims of bad lending practice keep their homes from foreclosures. Wells Fargo is another financial institution that is helping their customers refinance and work out payments in an effort to keep them in their homes and avoid foreclosures. As a whole, most lenders are against subprime lending, especially after the problems that they have brought on through the past year, and many hope to make the practice illegal.