The United States of Sub-Prime Loans

As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash

To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations...more

Where Are All the Real Estate Deals?

During a housing downturn, buyers may start looking out for big bargains, but for reliable investments consider the whole economic picture...

You may have heard that now is the time to buy real estate—if you can afford to. As contrarians point out, demand is weak, sales are slow, and inventory is high. Homeowners and homebuilders are slashing prices desperately, and savvy investors are snatching up cheap foreclosure properties. The real estate market is teeming with bargain-priced homes, just waiting for that next lucky buyer to come along.
Or so it seems. Most experts agree the era of home flipping is over and believe homes should be looked at foremost as shelter and secondarily as a long-term investment. But, as always, there are some areas of the country where homes are affordable, price appreciation is imminent, and the underlying economy is strong. In these places, you might just have an easy time finding a great bargain.
Along with economists at Fiserv (FISV), Lending Solutions, and Moody's (MCO) Economy.com, BusinessWeek put together a list of the best metropolitan areas for bargain homes by looking at affordability, forecasts for price appreciation and job growth, and recent price fluctuations. These areas are not for high-risk investors; they are perfect hunting grounds for smart buyers looking for decent home price appreciation and a pleasant place to live at a discount. ..more