California had most subprime loans, study says
California was the center of the mortgage meltdown that led to the nation’s current economic crisis, as lenders in the state issued a majority of all recent subprime loans, says a nonprofit journalism group based in Washington.
The study published Wednesday on the Center for Public Integrity’s Web site analyzed government data on $1.38 trillion worth of subprime mortgages made from 2005 to 2007.
The analysis found that about 56 percent of those loans were originated by 15 lenders from California.
“The size of the industry in California was massive,” said John Dunbar, lead reporter on the six-person team that spent more than six months analyzing millions of mortgages.
Titled “Who’s Behind the Financial Meltdown,” the report examines the causes and consequences of subprime lending. Subprime lenders created mortgages that gave people with low credit ratings cheap initial payments that grew more expensive over time. Some subprime lenders allowed people to state their income without documenting it.
Consumer and industry experts said one reason lenders in California were so big in subprimes is that the state is the nation’s largest and, arguably, costliest, real estate market, making it a natural home-lending center.
“The market was hotter here than just about anywhere else in the country,” said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.
Hobbs said subprime mortgages allowed many buyers to get properties they couldn’t finance with traditional loans, and, he said, the “vast majority” of such borrowers are current on their payments.
But Norma Garcia with the Consumers Union said California law doesn’t protect people against lending practices that allow them to get in over their heads.
“California was a very comfortable place for these subprime lenders to do business,” she said.
I don’t know about you, but it’s been a long week, so I’m glad this came out. It’s great to see that we are number 1! Woot!
My takeaways from this piece: California mortgage brokers worked hard to ensure that Californian home buyers had the freedom and liberty to get any type of mortgage, and any type of house they wanted.
Freedom! Liberty! Can the American dream be better represented in any way?
Thank goodness for California!