CRL: Subprime Has Hurt Homeownership

The Center for Responsible Lending said high foreclosure rates on subprime loans have resulted in a net loss of homeownership since 1998, directly contradicting claims by the mortgage industry about the benefits of subprime lending.Considering only 9% of subprime loans go to first-time homebuyers and projected foreclosure rates, "we see a net loss of homeownership every year since 1998 totaling almost 1 million families," CRL president Michael Calhoun told a House panel. Last year, an estimated 354,172 FT homebuyers used subprime loans, but the consumer group projects 624,631 subprime loans originated in 2006 will eventually end up in foreclosure -- resulting in a net loss of homeownership to 270,459 families. The Mortgage Bankers Association argues that CRL "invented" a set of assumptions and combined it with a worst-case scenario. "A more honest analysis, even using pessimistic numbers, would show that 85%-90% of subprime borrowers are ultimately successful on their loan," MBA said in a response to Mr. Calhoun's testimony.