You can kiss my subprime mortgage

On Thursday, NPR's On Point ran a story on subprime lending. Each time Tom Ashbrook introduced or recapped the segment, he stated that "we're talking about subprime mortgages -- loans for people with bad credit." He made some good points about predatory lending and brokers who work to convince people to buy homes they can't afford.

He also took calls from people who had lost their homes due to buying completely beyond their means and not understanding their variable interest rate. The callers did not even have the sense to sell the home at a loss when the payment skyrocketed, and instead kept the home until it was foreclosed. One caller in particular insisted that she was blameless in the equation. Ashbrook and his various experts also failed to mention that there are degrees of subprime lending, and there are reasons for taking out such loans.

I have a subprime mortgage. I also have excellent credit and always have. In 2005, when I bought my home, I didn't have five years of sufficient income history. I had been in graduate school from 2000 to 2002, and was self-employed and doing short-term contract work after that. My partner had also been in graduate school, been self-employed, and we'd been living in different places. Oh, I also didn't have anything for a down payment. So, I chose to take out a subprime loan. Granted it wasn't one with the horrendous rates some of the people on the show talked about, but it certainly is a subprime loan. The purchase was 100% financed, and the first mortgage is through Ameriquest, which is allegedly an evil corporation that forces people to buy homes only to lose them.

I was not coerced into buying a house I can't afford. I am in absolutely no danger of losing my home. I pay my mortgage on time every month without difficulty. I definitely did my homework regarding the different types of rates and am not going to encounter anything unexpected. I also am not a buyer with bad credit.

I've now paid my big old mortgage for the past two years without any trouble, yet I would still have have a hard time getting a standard mortgage today if I were a first-time homebuyer. This is because my income fluctuates too much, and a lot of it comes from personal checks that clients and their families write me on a weekly basis. The amount of the income and the good credit matter much less than whether someone has had a corporate paycheck at a set amount for the past five-plus years.

So, Tom Ashbrook, there's a whole other side to subprime lending. Some of us make an informed choice to take out such a loan, because we wish to buy a home but don't have five years of acceptable financial history. I'm quite happy with my financial situation and happy that I chose to become a homeowner. There is no need to label people with subprime loans as people with bad credit who are going to lose our homes.

Edited to add: I'd forgotten about this, but the broker also reported that a few lenders turned me down because their rules regarding what could be used as comparable homes were really strict. They needed the comp to also be four bedrooms, part of a three-family home, and within a few blocks of ours. There wasn't a recently sold house that matched this exactly. Other lenders with higher rates were fine with comps that were further away, or not in a three-family, or with using a three-bedroom.


Anonymous said...

well said.

Anonymous said...

In fairness, you didn't qualify for a traditional mortgage because you were a poor credit risk -- at least in the bankers' eyes (not mine). That's pretty similar to the short-hand reporters use on the news.

eeka said...

Anonymous, please see my comments policy -- can you put a name on your posts please? :o)

Yeah, I get that I'm a bad credit risk because, statistically, people whose income isn't as steady are more likely to miss payments on things.

But Ashbrook was implying that people who can't get typical mortgages have negative credit. He was more than implying, actually -- he and the experts both talked about scenarios that lead to derogatory lines on one's credit score.

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Layla said...

You are lucky that you can have subprime mortgage. But I couldn't get it and only bad credit mortgage helped me a lot. I wanted to buy home, but my credit history was not so good. I had limited income and insufficient savings, and buying home was for me like a distant dream as it required a good amount of money. And bad credit mortgage not only helped me to buy home but also provided great opportunity to re-establish my adverse credit past.