Tuesday, July 17, 2007

The Subprime Bait & Switch

An opinion article appearing in In These Times expresses a not-so-flattering point of view of the subprime mortgage lending industry, the tactics employed by some loan originators that has left the subprime mess that we deal with today, and the inherent problems that are very difficult to regulate. Among the points mentioned are (1) the misrepresentation of a loan’s characteristics, such as the concealment of a fixed rate “teaser” period that adjusts upward after two years, (2) the use of bait-and-switch tactics to lure in potential borrowers, (3) the targeting of low-income and minority communities, and (4) “perverse compensation incentives” for “hazardous” loan products. For more, see The Subprime Bait and Switch (Under the guise of extending home ownership to all, predatory lenders undermine community reinvestment).