Why did the banks continue to approve subprime morgages even if they realized people wouldnt be able
View your credit file based on any of the UK credit reference agencies, or all three at once
LifeLock is the only Identity Theft Prevention Solution backed by a one-million dollar guarantee!Click here to get a 10% discount.
why did the banks continue to approve subprime morgages, even if they knew that they were lending to people with poor credit? i figured they would have to know that alot of people would default on their loans once they got a taste of the bigger interest hike and the lenders would be losing a ton of cash. Is it because they went ahead and put it out into the stock market that they didnt care?
Why did the banks continue to approve subprime morgages even if they realized people wouldnt be able to pay?The lenders are becoming a lot more cautious now, but traditionally real estate has been a fairly solid investment.
Up until the recent past, anyone with 20% down was almost a shoe-in for financing because if they defaulted, the bank would still be able to sell the property off and not lose any money because the property was worth more than the amount of the loan. In the mortgage industry, lenders made the most money on sub-prime mortgages because the interest rates were much higher.
I don't think that anyone anticipated this much of a melt-down in housing prices. Under normal market conditions, the borrowers would just refinance, but since their properties are now not worth what they paid for them, they cannot refinance because no lender is willing to offer mortgages for more than what the house is worth.
The buyers had every opportunity to read the conditions on these mortgages and most of them knew full well what the rate resets would be, but they gambled that their purchases would appreciate fast enough so that they could either sell at a profit or refinance later before the rates reset.
More Related Questions and Answers ...
The loan information post by website user , we not guarantee correctness.