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City commissions $235,000 analysis of local subprime lending
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WASHINGTON (Map, News) - D.C. officials are so concerned about the impact of the collapsing subprime mortgage market that they will spend hundreds of thousands of dollars to study the lending practice and its use within the nation’s capital.
The Department of Insurance, Securities and Banking recently awarded a $234,750 contract to the Center for Responsible Lending for an analysis of local subprime lending — those risky high-interest mortgages secured by homeowners with limited or poor credit history.
The nationwide subprime market is in complete meltdown. As interest rates on the loans adjust higher, homeowners can’t keep up with their mortgages and foreclosures skyrocket.
Leslie Parish, a researcher with the Center for Responsible Lending, said her organization will use focus groups, telephone surveys and reams of data to break down what mortgages are most common among District homeowners, who in the city has made use of subprime loans, and how to help those same people become more financially secure through outreach and financial education.
She said she expects to find that subprimes are popular in the District.
“I would expect so, especially because of the rising of cost of housing people are really trying to stretch themselves to get into home ownership,” Parish said.
The D.C. study, which should be complete by January, also will include work by The Urban Institute, The Reinvestment Fund, the National Community Reinvestment Coalition and the Capital Area Asset Builders.
Ward 3 D.C. Council Member Mary Cheh, who has oversight of the insurance and banking industries, said she’s introduced two bills ahead of the study, one tackling mortgage scams and another requiring interest and payment disclosures well before closing.
“Based upon what they find I might have additional legislation,” Cheh said of the study, “but I’m not waiting for it.”
Increasing foreclosures have made it much more difficult for people even with good credit to obtain mortgages. The impact is considerable for future homeowners and developers looking to fill new residential complexes in up-and-coming areas such as Petworth, Columbia Heights or Anacostia.
mneibauer@dcexaminer.com
Comments from Examiner Readers
7:33 AM MST on Fri., Dec. 7, 2007 re: "D.C. lenders not part of mortgage deal"
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8:35 AM MST on Thu., Aug. 30, 2007
re: "City commissions $235,000 analysis of local subprime lending"
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Examiner Reader said:
If the government (lawmakers) wants to bailout one sector of the economy, that gambled with the mortages, they can do so by forfeiting the salaries and in some cases, giving a charitible deduction of their private wealth. They also should ask their banker ( lobbying friends) to bring down the "usury" credit card rates and auto loan rates for subprime credit folks. If they want to bailout the economy bail all of us out at once! This is nothing more than election politics. They forced people to lend to subprime borrowers now they want a do over? This is not a sports game. This is a free market economy. They can also enforce the Rico statutes on the FICO people who never abide by the laws of the " Fair Credit practices" They are the real culprits, who should have serious fines, lveied against them.
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Examiner Reader said:
I believe that subprime lending is a lot like Jessica Rabbit...not bad, just drawn that way. There are companies, like Ocean Capital in Rhode Island, that make financing available for sole proprietor businesses that would not be able to secure financing in the traditional marketplace. We've all got to start somewhere and oftentimes a stated income loan is the only means to start one's business.
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