Weston luxury homes, Cape Coral luxury homes

When the housing crisis began to unfold a few years ago, the nation pointed the finger at lenders who were issuing what was termed subprime loans. These loans were being offered to individuals without any qualifying financials.

Borrowers who couldn’t afford Weston luxury homes, Cape Coral luxury homes, and other properties were given the red light and entered into mortgages they couldn’t afford. When mortgages couldn’t be paid, homes began to go belly up causing a national mortgage crisis.

Because of the financial crisis that brought the nation to a crashing halt, the Consumer Financial Protection Bureau drew up stricter loan regulations in 2013 that offered borrowers much needed protection against lender abuses and reckless lending standards.

Lenders were then required to ensure that borrowers had the ability to repay their mortgages before they issued them, helping protect borrowers from being lured into a financial obligation they couldn’t repay. In return, lenders were protected from lawsuits brought against them by borrowers as long as safe mortgages were issued that followed federal guidelines.

Today’s Subprime Loans

A recent report by credit bureau Equifax indicated an increase in “subprime” mortgages being issued by lenders. However, these subprime loans may be a tad different than the previous ones a decade ago that brought Weston luxury homes and Cape Coral luxury homes into foreclosure.

In this context, the subprime loans are defined as loans to borrowers with a credit score below 620.

According to data from the latest Equifax National Consumer Credit Trends Report, individuals with subprime credit scores are having more and more mortgage loans drawn up and issued. In fact, for the first five months of 2015, subprime mortgages increased 30.5 percent for first mortgages when compared to the same period a year ago.

Categories of Mortgages

Three categories of mortgages showed increases in subprime loans:

  • First Mortgage: The primary loan on a property.
  • Home Equity Installment Loans (HEIL): A loan that allows you to borrow money against the value of your home.
  • Home Equity Lines of Credit (HELOC): A loan that lends a maximum amount within an agreed period where the collateral is the borrower’s equity in his/her house.

Trends on Subprime Loans

Although this is an interesting trend, Equifax points out that these numbers are not even close to the number of subprime loans being issued just before the Great Recession hit.  Good news for the Weston luxury homes and Cape Coral luxury homes market.

The mortgages reviewed by the Equifax report numbered 3.26 million, and only 4.6 percent were subprime. This moved up from the less than 4 percent of subprime loans that were issued in the first five months of 2014.

Other key data on subprime originations from the Equifax report:

  • First mortgages issued from January through May 2015 numbered 3.26 million, and out of these 143,800 were given to consumer that had a score credit score under 620.
  • HE loans issued from January through May 2015 numbered more than 280,700, and out of these 30,900 were given to consumers that registered low credit scores.
  • HE installment loan originations surged to their highest level since 2008, increasing to 22.4 when compared to the same time one year ago.
  • Subprime originations rose by 29.5 percent.
  • New subprime HE loans also rose by 11.6 percent from one year ago.

Although these numbers may be a bit concerning to some in the real estate industry, Equifax Chief Economist Amy Crews Cutts says that today’s subprime lending is being underwritten even more carefully than on standard mortgages. History will not soon be forgotten.

Florida Realty News
Florida Realty News
Berkshire Hathaway HomeServices Florida Realty, a wholly-owned subsidiary of WCI Communities, has over 39 locations and more than 1,650 real estate sales professionals and team members serving 17 counties throughout Florida.
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