CRL: 19% of '05/'06 B&C Loans Will Foreclose

Almost 20% of all subprime loans funded over the past two years will wind up in foreclosure, according to a new report issued by the Center for Responsible Lending.At a news conference on Dec. 19, CRL president Mike Calhoun said that when refinancings of troubled loans are factored into the equation, one-third of all B&C loans could go bust. In particular, the nonprofit chastised mortgage bankers for qualifying borrowers -- especially minorities -- using low teaser rates (instead of the fully indexed rate). Analyzing six million subprime loans funded since 1998, the CRL said foreclosures could eventually cost consumers $164 billion. The Mortgage Bankers Association criticized the group's findings, saying the CRL's numbers are cumulative and ignore the potential for delinquent loans to be worked out prior to foreclosure. "Their projections are incredibly pessimistic," said MBA senior economist Mike Fratantoni. At the end of the third quarter, just 3.8% of subprime loans were in foreclosure, according to the MBA. One in four loans in the foreclosure category are cured prior to actually being foreclosed upon, the MBA noted. Pat Vredevoogd, president-elect of the National Association of Realtors, participated with the CRL during the news conference, but the NAR did not fund the new report. The CRL can be found online at http://www.responsiblelending.org.