SocraticGadfly: It’s no longer just a subprime bubble — primes, HELOCs in trouble

February 12, 2008

It’s no longer just a subprime bubble — primes, HELOCs in trouble

Not quite a “duh” story, the Gray Lady notes the credit/housing bubble is extending to prime loans.

As should be expected, the main problem in prime loans is with ARMs or principal-only starter payments. While some people with ARMs may have been deliberate dice-rollers, I’m guessing some of them were on the borderline of prime-land, and an ARM was the only way they could enter.

Oh, and take note of predatory lending in the case of Brenda Harris:
At the time (of her home purchase), she asked for a loan that could be refinanced after one year without penalty. She said her broker had told her a week before the closing that the penalty would extend until May 2009 and that she reluctantly agreed because she had already started moving.

Even worse in our negative-savings-rate country, more than 5 percent of home-equity lines of credit are in default.

In other words, more people with less money to spend, meaning the current recession is not likely to be the most mild one.

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