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Expert: Subprime-loan crisis has many causes
Riskiest loans went to the most vulnerable buyers, he says
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Published: May 30, 2008
These days it is hard for Keith Corbett to avoid the subject of subprime loans and foreclosures.
"I don't think an evening goes by on the news that you don't hear something about subprime lending," Corbett, the executive vice president of the Center for Responsible Lending in Durham, said yesterday at the Winston-Salem Urban League.
Corbett and Susan Lupton, a senior policy associate for the Center for Responsible Lending, spoke about the mortgage-foreclosure crisis in Northwest North Carolina, the state and the country before a group of 75 during a lunch-and-learn seminar sponsored by the league.
The Center for Responsible Lending is a nonprofit, nonpartisan research and advocacy organization that promotes responsible lending practices and access to fair terms of credit for low-wealth families.
Corbett said that there are a lot of myths about subprime loans. They include:
• Irresponsible people caused the subprime mess.
• Subprime loans increased home ownership.
• People bought too much house.
In reality, he said, there are a lot of reasons for the problem, including shoddy underwriting and aggressive marketing of the loans, and the fact that the riskiest loans went to the most vulnerable borrowers.
Corbett said that subprime lending decreases home ownership and that the median subprime loan in North Carolina was $114,000 in 2006.
Lupton said that people think that the problem is not so bad in North Carolina, even though foreclosure starts, or filings, have risen over the past few years.
There were 49,754 foreclosure starts in the state in 2007, compared with 16,661 foreclosure starts in 1998. The center estimates that there will be 60,000 foreclosure starts in the state this year and expects a 15 percent to 20 percent annual increase over the next few years.
In Forsyth County, foreclosure starts tripled to 1,983 in 2007 from 680 in 1998.
The good news for Forsyth County is that, from the first quarter of 2004 to the fourth quarter of 2007, annual housing-price appreciation in the county has been steady, not rising dramatically high, then declining sharply. Sharp fluctuations in housing prices in such cities as Wilmington, Jacksonville and Asheville have left some people with home loans that are higher than the value of their houses.
Lupton warned that consumers without subprime loans can still be affected by foreclosures in their neighborhoods because people typically do not want to buy a house on a block where there are a lot of foreclosed homes and declining property values.
Lupton and Corbett said that the subprime-foreclosure problem has hit "communities of color," such as blacks and Hispanics, the hardest.
■ Fran Daniel can be reached at 727-7366 or at fdaniel@wsjournal.com.
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