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| 9858 Clint Moore Road, Boca Raton, FL 33496 | Caesar: (561) 715-8630 or Eileen: (561) 271-1311 |
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Starter Homes, Sad Endings
Millions of lower-income families used easy-money loans to buy first homes over the past decade. Many put nothing down, paid no closing costs and received low introductory payments. When the payments start climbing, many families can't keep up. Experts predict more than 1.5 million families who bought homes in recent years will lose those homes during the current wave. Foreclosures are personal disasters, but it is increasingly clear that clusters of foreclosures damage entire neighborhoods. Home prices drop. Remaining owners can't afford to sell their homes for less than they paid. Additional foreclosures result. Renters move in. Crime can rise. Subprime loans accounted for at least 24 percent of Mecklenburg foreclosures. Government-insured loans accounted for almost 30 percent. The same companies often arrange both kinds of loans. They work with homebuyers who don't get loans from conventional sources such as banks. Some of those people have bad credit, others have little savings or income, some simply don't know they could get a better deal somewhere else. The subprime industry grew up in the mid-1990s. The companies charge high interest rates, but impose few restrictions on eligibility. Most of the loans are sold through independent mortgage brokers. Investors provided the money for the subprime industry. They profited handsomely from borrowers' payments. But as defaults rise, concern about those investments has driven down the stock market. Five of the largest subprime lenders have fired almost 6,000 people in the past year. New Century Financial, the second-largest subprime lender, is on the verge of filing for bankruptcy. Government-insured loans are also funded by investors, but the federal government promises to pay if the borrower doesn't. This encourages lending to lower-income families, but it leaves companies with little reason to exercise caution. In many cases, lenders made larger loans than borrowers could afford. click here for entire article Ready to buy or sell Palm Beach real estate? Consult with licensed agent Caesar Parisi. Caesar has assisted hundreds of buyers and sellers, giving sound advice on how to most effectively buy and sell property. |
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