The Subprime market is collapsing and what this might mean for you

Those borrowers who are “credit-challenged” typically end up getting a loan in the sub-prime market.  The lending standards for these borrowers was very loose over the past few years and that created problems that are coming due now.  Lenders would lend on stated income to 100% loan to value.  With these loans, there is no equity to tap into so in a declining value market, the homeowner would need to pay additional money into escrow to sell their home.  It is coming to light now that many of these loans were “over-stated income” loans meaning that the lender and/or the borrower were not truthful on their statement of income.  (more…)