I'm hearing a lot in the news lately about "high risk mortgages". I was wondering what they are, exactly? What constitutes as a high risk mortgage? Not being able to make payments every month? Or credit scores?
2007-12-05 04:46:47 · 8 answers · asked by manhattanchicka 3 in Business & Finance ➔ Renting & Real Estate
High risk = higher risk (to the lender) that the borrower will default, resulting in foreclosure (which is expensive for everyone). Risk is an evaluation of borrower's credit history, income, available liquid assets, existing debt, & employment stability. Higher risk borrowers are eligible only for "sub-prime" loans with corresponding higher interest. To keep a high risk borrower from walking away from the higher payment, irresponsible loan officers offer low teaser rate loans that reset to high rates in 1-2 years.
2007-12-05 06:45:58 · answer #1 · answered by Anonymous · 0⤊ 0⤋
The mortgage is considered high risk from the banks side. This occurs when they loan more money to the borrower than they can reasonably be expected to pay back.
That is how the current mortgage crisis got started. In order for people to qualify for loans the borrower would put them into this adjustable rate mortgages. Once the interest rates started to go up - these folks mortgage payments went up beyond their ability to pay. The mortgage companies should have known better than to give out these loans - but they allowed it to happen anyway.
2007-12-05 04:54:04 · answer #2 · answered by Fester Frump 7 · 1⤊ 1⤋
I believe, when the rates were very low for 10-15 year mortgages, people started buying the houses. But it works so that you have low rate for only certain number of years out of the whole term and then percentage changes to match the current rate. Therefore, from 3% to 7% is a huge jump for some people, especially if the amount borrowed is huge... People can't continue paying and go into foreclosures. Kinda scary...
2007-12-05 04:54:14 · answer #3 · answered by Yana 3 · 0⤊ 1⤋
mortages to people with low credit scores that often have features that will have the interest rate and therefore the mortgage payment jump significantly on a reset date. text
2007-12-05 04:53:42 · answer #4 · answered by redwine 6 · 0⤊ 0⤋
someone is judged as high risk generally according to credit score/ credit file information. financial institutions share information with credit reference agencies. when you try to take out credit , the company will consult with the credit reference agency to see what you credit history is like. i.e how many loans , credit cards etc you have or have had, what the payment history is like. risk assesment involves assesing things like income as well and other things.
2007-12-05 04:52:56 · answer #5 · answered by ADad 5 · 1⤊ 0⤋
I want to believe it's lending to people with high debt, those not earning enough or having bad credit.
2007-12-05 04:50:49 · answer #6 · answered by ProArtWork 4 · 0⤊ 1⤋
it's loans made to persons who have low credit scores.
2007-12-05 04:53:00 · answer #7 · answered by Anonymous · 0⤊ 0⤋
they could envision it, and likely will. they are not stupid. in case you get stuck, they could basically deny the non-public loan in case you get very fortunate. yet you would possibly want to be criminally charged with fraud.
2016-10-25 12:10:48 · answer #8 · answered by ? 4 · 0⤊ 0⤋