TIGHTENING CREDIT AND THE CHANGING FINANCIAL MARKET Mike Calhoun. NeighborWorks Atlanta, Georgia February 18, 2009. Center for Responsible Lending.
Atlanta, Georgia February 18, 2009
Fed. Reserve Chairman Ben Bernanke:
“Although the high rate of delinquency has a number of causes, it seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans, particularly high-cost loans, that were inappropriate for or misled the borrower.”
(July 14, 2008 Statement)
2 million homeowners with subprime mortgages will lose their homes to foreclosure, most by year-end 2009.
This is in addition to the 700,000 homes with subprime loans currently in foreclosure or REO.
(Source: Credit Suisse, Foreclosure Trends 4/23/08)
Higher cost (subprime) 1st lien loans: 2005 HMDA Data
Made to credit-worthy borrowers with some element of added risk, e.g.:
10 to 13 million mortgage loans will fall into foreclosure over the next 5 years.
For the market as a whole, 1 out of every 6 homeowners who currently has a mortgage faces losing their home to foreclosure.
Mortgage Backed Securities (MBS) are securities backed by pools of mortgages.
Collateralized Mortgage Obligations (CMOs) are securities backed by pools of MBS, and are often highly leveraged.
Some CMOs are backed by pools of CMOs.
Court-supervised Loan Modifications (bankruptcy reform)
Additional Consumer Protections for future loans
A. Exploring Lease-Purchase as a Community Stabilization Strategy – Gwinnett
B. New Approaches to Financing and Credit Scoring – Cherokee
C. Maximize Your Technology: How Innovative Tools Can Improve Your Service Delivery – Henry
D. Counseling Challenges and Successes in Response to Market Changes - Forsythe