Waking Up to Credit Woes

There are two interesting articles to read at the start of this week. First, the New York Times dissected the correlation between subprime mortgage loans, geographic location and race (free login may be required). According to the article, subprime loans are most highly concentrated in neighborhoods that are largely black, hispanic or both.  This is true across middle-income and even high-income areas.

Since subprime loans are based on credit scores and credit scores don't take into account rate, income, neighborhood or net worth, it is interested thing to see this organic gap emerge. The article cites the lack of traditional banks and the prominence of largely s bprime banks in these areas as the likely main cause.

The moral to this story is definitely "shop around for your mortgage." It's possible that a large percentage of people who received subprime loans could have qualified for a traditional mortgage if they went to a different bank or lender. An interactive graphic of the percentage of subprime mortgages by county accompanies the article. Did you know there is a county in Texas where 82% of the mortgages are subprime?

The second must-read article of the day comes from MarketWatch (login may be required). According to a recent Fed report, we're currently going through an unprecedented tightening in lender standards. Mortgages are harder to get now than they have been in the last 17 years. Banks are cracking down on prime borrowers and subprime borrowers. 60% of banks have raised their lending standards for non-traditional (alt-A) mortgages and many have stopped issuing subprime loans at all.

I hope you'll read both articles this morning. Overall, they paint a pretty worrisome picture of the future housing market. If you want, share your opinions and feedback in the comments section below.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Comments

Great idea for a blog. Keep it up!! :-)

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