“People know that there are door-knocking campaigns and community organizers do it all the time, but have they thought of this consciously as a tool for economic development,” explains Keane Bhatt, senior associate for policy and strategy at the Democracy Collaborative, based in Takoma Park, Maryland. Bhatt is co-author of Educate and Empower: Tools for Building Community Wealth, a report released today that features profiles of 11 organizations including PUSH Buffalo.
“What we’ve done is go around to 11 different community-wealth building institutions to try to seek out from a broad diversity of initiatives some kind of underlying themes that are crosscutting in nature,” Bhatt says.
Wealth, given the community economic development focus, is defined here primarily as some form of assets under the community’s control, be it land, a healthcare system, a community bank, or some other economic entity or network of entities.
Community control can mean different things, from worker cooperatives, to community members or workers acting as vocal board directors, to people like Jennifer Meccozi, who started out as a concerned community member and rose up the ranks in PUSH to a leadership position.
The report identifies 21 key crosscutting themes, including tactics like door knocking, participatory learning and inclusive governance, each conveniently summarized in the report’s extended (but not too text heavy) executive summary.
Bhatt says that in some cases, a particular strategy was effective in diverse contexts. Door knocking was one.
Bhatt and co-author Steve Dubb chose the 11 institutions for their diversity. There’s the tiny Wellspring Collaborative, established in 2014 and employing all of six people in inner-city Springfield, Massachusetts. There’s Newark, New Jersey’s massive New Community Corporation, established in 1968, employing 600 local residents, managing 2,000 housing units and owning roughly half a billion dollars’ worth of assets. There’s Market Creek Plaza in San Diego, a $23.5 million, mixed-use, commercial-retail-residential development partly owned by the community.
Michael Tashjian was named chief executive officer of Patriot Financial Group in June. He has more than 20 years#x2019; experience in the financial planning industry. The Norwood native lives in Walpole with his wife and three children, where he enjoys coaching youth sports.#xa0;Westboro-based Patriot Financial Group provides all kinds of insurance and financial planning services, from college and retirement planning to wealth management. With an office staff of 12, the company has about $1.5 billion of assets under management, and supports 44 independent advisers and 100 affiliated representatives.
How did you get into the financial advising?
It was through a longtime friend of mine, who had just joined as an agent with Prudential. He said I should come and check it out, and I jumped on board, and it has worked out really well.#xa0;When I joined, I was working two or three jobs just to pay my bills, and I didn#x2019;t want anyone to tell me how much I could earn, and because I was coaching football, I wanted to be able to control my own schedule. Time is more valuable than anything, because you can#x2019;t get any of it back.
What is the secret to your success?
You have to sit down and find out the client#x2019;s goals, risk tolerance and time frame for when they will need those assets. We diversify the portfolio properly, and then we stay the course. The adviser#x2019;s role is to manage the relationship between the client and the emotions that go into money.
As CEO, you have different responsibilities than when you were just an agent. What#x2019;s changed?
As an agent, I was focused on building my book of business, working with friends and family members. But I#x2019;m also a coach, and coaching and mentoring are very similar, and I started to mentor other advisers on how to grow their businesses.#xa0;I started looking at my own career path, and I realized I liked coaching agents, and David O#x2019;Donnell and I have been talking for about a year, and we made the decision to be partners. He is the chairman, and I am the CEO, and we own the business 50-50.#xa0;We are still growing and expanding, and our agents are spread out – in Worcester, Shrewsbury, Wellesley, Burlington; Warwick, RI; Lewiston, Maine; and Houston, Texas.
So what do you do?
I am still an adviser, and I still meet with clients, but my primary responsibility is to help support the advisers. They are all independent advisers who own their own business, and we provide them with back office support to process their business. We also provide a culture and family environment, and I coach the advisers to help them grow.#xa0;If we affiliate with a bank, I will introduce the adviser to the bank representatives, so they know who their point of contact is. I will also sit down with an adviser or a team, and help them develop strategies to grow their business.#xa0;To that end, we have a full-time marketing representative who can help write up a business plan and the materials they need to execute it. We also have a full-time compliance officer to make sure that we stay in compliance.
What has been the most satisfying part of your work?
Ultimately, it#x2019;s that we help people. I#x2019;m not a doctor, and I don#x2019;t save people#x2019;s lives, but when I think of all the advisers we have, and how many children can go to college, and how many people can maintain their lifestyle in retirement and how people can go through emotionally devastating circumstances and be OK financially, this is a very rewarding industry.
Compiled by correspondent#xa0;Sandy Meindersma
Stacy Bush, Valdosta Today Financial Contributor
American households hold an average debt of nearly $54,000, with 35% having debt in collections.
Little wonder that money worries are a major cause of stress.
The Link Between Stress and Health
Humans have an innate response called “flight or fight.” It is nature’s way of launching our bodies into action; consider the physical responses we feel during moments of stress–faster heartbeat, accelerated breathing, tightening of muscles, and increase in sweating.
These are response mechanisms that prepared our ancestors to run from, or confront, a danger on the savanna. But they can be less useful in more modern times.
In the short term, stress can manifest itself in physical symptoms, such as headaches, fatigue, difficulty sleeping or concentrating, an upset stomach, and general irritability.
These brief episodes of stress usually do not cause lasting harm to personal health.
However, debt–and the stress it causes–is typically a persistent problem. If your stress system stays activated over longer periods of time, it can lead to serious health problems, such as depression, high blood pressure, weight gain or loss, a change in sex drive, sleep deprivation, stomach complications, and even heart conditions.²
Managing Stress and Debt
If you are experiencing debt-related stress, you should consider attacking the root of the problem. Generally, it takes time to work down debt, but that doesn’t mean you can’t manage the stress during the interim period.³
The fact that you have a strategy to eliminate your debt is the first step to lowering stress, since the sense of control that a strategy gives you might furnish you with hope and optimism.
It’s also important that you keep your debt worries in perspective. Remind yourself that debt may not permanently ruin your life. Writing in a journal can be helpful as an outlet to the worried thoughts that can cycle endlessly through your mind. Seek social support–knowing that family and friends are in your corner can be a great source of strength.
Finally, find time for laughter and extending small kindnesses–each unleashes wonderfully positive chemical reactions that are good for the soul and the body.
Stacy Bush has practiced independent financial advising in the Valdosta area for 14 years. Growing up on a farm in Donalsonville, Georgia, he is keen to the financial needs of South Georgia and North Florida families. Stacy and his wife, Carla, live in Valdosta with their four children. You can submit questions about this article to email@example.com
Federal Reserve Chair Janet Yellen prepares to testify July 16 before the Senate Banking Committee on Capitol Hill in Washington. Another solid US jobs report all but assures the Fed will raise interest rates in September 2015, leading to costlier home and other consumer loans.
(Susan Walsh/The Associated Press)
By Michael Hudson.
The major financial problem tearing economies apart over the past century has lain more with official inter-governmental debt than with private-sector debt. That is why the global economy today faces a similar breakdown to 1929-31, when it became apparent that the volume of official inter-government debts could not be paid. The Versailles Treaty had imposed impossibly high reparations demands on Germany, and the United States imposed equally destructive demands on the Allies to use their reparations receipts to pay World War I arms debts to the US Government.
Legal procedures are well established to cope with corporate and personal bankruptcy. Courts write down personal and business debts either under “debtor in control” procedures or foreclosure, and creditors take a loss on loans gone bad. Personal bankruptcy permits individuals to make a fresh start with a Clean Slate.
It is much harder to write down debts owed to or guaranteed by governments. US student loan debt cannot be written off, but remains to prevent graduates from earning enough take-home pay (after debt service and FICA Social Security tax withholding is taken out of their paychecks) to get married, start families and buy homes of their own. Only the banks get bailed out, now that they have become in effect the economy’s central planners.
Most of all, there is no legal framework for writing down debts owed to the IMF, the European Central Bank (ECB), or to European and American creditor governments. Since the 1960s entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government financial warriors.
The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and writes down debts in keeping with the ability to be paid, inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards plus selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.
Imposed by the monopoly of inter-governmental financial institutions – the IMF, ECB, US Treasury, and so forth – creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: rising suicide rates, shorter lifespans, and emigration of the age-cohort that always have been the major casualties of war: young adults. Instead of being drafted into the army to fight foreign foes, they are driven from their homes to find work abroad. What used to be a rural exodus from the land to the cities from the 17th century onward is now a “debtor exodus” from countries whose governments owe unpayably high sums to creditor governments and to the banks and bondholders on whose behalf they impose their policy.
While pushing the world economy into a state of war internationally, high finance also is waging a class war against labor – and ultimately against governments and thus against democracy. The ECB’s policy has been brutal toward Greece this year: “If you do not re-elect a right-wing party or coalition, we will destroy your banking system. If you do not sell off your public domain to buyers we will make life even harder for you.”
No wonder Greek Finance Minister Janis Varoufakis called the Troika’s negotiating position “financial terrorism.” Their idea of “negotiation” is surrender. They are unyielding. Official creditor institutions threaten to isolate, sanction and destroy entire economies, including their industry as well as labor. It transforms the 19th-century class war into a purely destructive meltdown.
That is the great difference between today and 1929-31. Then, the world’s leading governments finally recognized that debts could not be paid and suspended German reparations and Inter-Ally debts. Today’s situation is using the unpayability of debts as leverage as class war.
The immediate political aim of this financial warfare in Greece is to replace its elected government (supported by a remarkable July 5 referendum vote of 61 to 39) with foreign creditor control by “technocrats,” that is, bank lobbyists, factotums and former Goldman Sachs managers. The long-term aim is to impose a war against labor – in the form of austerity – and against the power of governments to determine their own tax policy, financial policy and public regulatory policy.
Fortunately, there is an alternative. Here is what is needed. (I outlined my proposals in a presentation before the Brussels Parliament on July 3, following an earlier advocacy at The Delphi Initiative in Greece, convened by Left Syriza the preceding week.)
A declaration reaffirming the rights of sovereign nations
Sovereign nations have a right to put their own growth ahead of foreign creditors. No nation should be obliged to impose chronic depression and unemployment or polarize the distribution of wealth and income in order to pay debts.
Every nation has the right to the key criteria of nationhood: the rights to issue its own money, to levy taxes, and to write its laws, including those governing relations between creditors and debtors, especially the terms of bankruptcy and debt forgiveness.
Economic logic dictates what was recognized by the end of the 1920s: When debts reach the level that they disturb basic economic balance and derange society, they should be annulled. Another way of saying this is that the volume of debt – and its carrying charges – must be brought within the reasonable ability to pay.
Rejecting the “hard money” (really a “hard creditor”) position of anti-German, anti-labor economists Bertil Ohlin and Jacques Rueff, Keynes argued that creditors had an obligation to explain to Germany just how they would enable it to pay its reparations. He meant at that time specifically that France, Britain and other recipients of reparations should specify just what German exports they would agree to buy. But today, creditors define a nation’s ability to pay not in terms of how it can earn the money to pay, but rather what public domain assets it can sell off in what is a national bankruptcy proceeding. Debtor countries are to let their public infrastructure be sold off to rent-extractors to create what a neofeudal tollbooth economy.
Under international law, no nation is legally obliged to do this. And under the moral definition of nationhood, they should not be forced to do so. Their right to resist this is what makes them sovereign, after all.
An international forum to adjudicate the ability (or inability) to pay debts
What is needed to put this basic principle into practice is creation of a new international forum to adjudicate how much debt can reasonably be paid – and how much should be annulled. In 1929 the Young Plan (which replaced the Dawes Plan to deal more rationally with German reparations) called for creation of such an institution – what became the Bank for International Settlements (BIS) in 1931 to stop the economic destruction of Germany by bringing its reparations back within the ability to pay.
The BIS no longer can play such a role, because it has become the main meeting place for the world’s central banks, and as such has adopted the hardline “all debts must be paid” position that it originally was intended to oppose.
Likewise the IMF no longer can play this position. It is hopelessly political. Despite its technical staff ruling in 2010-11 that Greece’s foreign debts could not be paid and hence needed to be written off, its heads – first Dominique Strauss-Kahn and then Lagarde – acted in blatant conflict of interest to support the French bankers demands for payment in full, and US demands by President Obama and Wall Street lobbyist Tim Geithner to insist that there be no writedown at all. That was the price for French bank support for Strauss-Kahn’s intended bid for the French presidency, and recently for Lagarde’s support. Given the US veto power by Wall Street and the insistence that right-wing anti-labor ideologues (usually French) be appointed head of the IMF, a new organization representing the kind of economic logic outlined by Keynes, Harold Moulton and others in the 1920s is necessary.
Creation of such an institution should be a leading plank of Euro-left politics.
A Law of Fraudulent Conveyance, applicable to governments
The private sector has long had laws that prevent money-lenders from lending a borrower more funds than the debtor can reasonably be expected to pay back in the normal course of business. If a lender advances, say, $10,000 as a mortgage loan against a house worth more (say, $100,000), and then insists that the debtor pay or lose his home, the courts may assume that the loan was made with this aim in mind, and annul the debt.
Likewise, if a company is raided by borrowers loading it down with high-interest junk bonds, and then seize its pension funds and sell off assets to pay their debts, the company under attack can sue under fraudulent conveyance rules. They did so in the 1980s.
This lend-to-foreclose ploy is the game that the Troika have played with Greece. They lent its government money that the IMF economists explained quite clearly in 2010-11 (and reaffirmed this year just before the Greek referendum) could not be paid. But the ECB then came in and said, “Sell off your infrastructure, sell your ports, your gas rights in the Aegean, and entire islands, to get the money to pay what the IMF and ECB have paid French, German and other bondholders on your behalf (while saving US investment banks and hedge funds from losing their bets that Greek debts would indeed be paid).
Application of this principle requires an international court to rule on the point at which debt service becomes intrusive, and write down debts accordingly.
No such set of institutions exists today.
Creation of Treasuries as national central banks to monetize deficit spending
Central banks today only lend money to banks, for the purpose of loading economies down with debt. The irrational demand by bankers to prevent a public option from creating credit on its own computer keyboards (the same way that banks create loans and deposits) is designed simply to create a private monopoly to extract economic rent n the form of interest, fees, and finally to foreclose on defaulting creditors – all guaranteed by “taxpayers.”
The European Central Bank is not suited for this duty. First of all, it is based on the ideology that public money creation is inflationary. The reality is that central bank money creation has just financed the greatest inflation of modern history – asset price inflation of the real estate market by junk mortgages, inflation of stock prices by junk bond issues, and central bank Quantitative Easing to create the fastest and largest bond market rally in history. The post-1980 experience with central banks has removed any moral or economic logic in their behavior as lobbyists for commercial banks, defenders of their special privileges, deregulator of financial crime, and extremist right-wing blockers of a public option in banking to bring basic services in line with actual costs. In short, if commercial banking systems in nearly every country have become de-industrialized and perverse, their enablers have become central banks.
The remedy is to replace these central banks with what preceded them: national Treasuries, whose proper function is to monetize government spending into the economy. The basic principle at work should be that any economy’s monetary and credit needs should be met by public spending and monetization, not by commercial banks creating interest-bearing credit to finance the transfer of assets (eg, real estate mortgages, corporate buyouts and raids, arbitrage and casino-capitalist gambles).
Every nation has a right to defend itself against attack – financial attack just as overt military attack. That is part of the principle of self-determination.
Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack as that of the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward. International law needs to be updated to recognize that finance has become the modern-day mode of warfare. Its objectives are the same: acquisition of land, raw materials and monopolies.
A byproduct of this warfare has been to make today’s financial network so dysfunctional that nations need a financial Clean Slate. The most successful one in modern times was Germany’s Economic Miracle – the post-World War II Allied Monetary Reform. All domestic German debts were annulled, except employer wage debts to their labor force, and basic working balances. Later, in 1953, its international debts were written down. The logic prompting both these acts needs to be re-applied today.
With specific regard to Greece, Syriza’s leaders have said that they want to save Europe. First of all, from the eurozone’s destructive economic irrationality in not having a real central bank. This defect was deliberately built into the eurozone, to enforce a monopoly of commercial banks and bondholders powerful enough to gain control of governments, overruling democratic politics and referendums.
Eurozone rules – the Maastricht and Lisbon treaties – aimed at blocking governments from running budget deficits in a way that spend money into the economy to revive employment. The new aim is only to rescue bondholders and banks from making bad loans and even fraudulent loans, bailing them out at public expense. Economies are obliged to turn to commercial banks for loans to obtain the money that any economy needs to grow. this principle needs to be rejected on grounds that it violates a basic sovereign right of governments and economic democracy.
Once an economy is fiscally crippled by (1) not having a central bank to finance government spending, and (2) by limiting government budget deficits to just 3% of GDP, the economy must shrink. A shrinking economy will mean fewer tax revenues, and hence deeper government budget deficits and rising government debt.
The ultimate killer is for the ECB, IMF and EC to demand that governments pay their debts by privatizing public infrastructure, natural resources, land and other assets in the public domain. To compound this demand, the Troika have blocked Greece from selling to the highest bidder, if that turns out to be Gazprom or another Russian company. Financial politics thus has become militarized as part of NATO New Cold War politics. Debtor economies are directed to sell to euro-kleptocrats – on terms financed by banks, so that interest charges on the deal absorb all the profits, leaving governments without much income tax.
 This is the theme of my Super Imperialism: The Economic Strategy of American Empire (1972, new ed., 2002).
 The video of the day can be found here: http://www.guengl.eu/news/article/press-conferences/peripheral-debts-causes-consequences-and-solutions.-2-july
I’m at about 37 minutes.
 I summarize this debate between Keynes and his antagonists in Trade, Development and Foreign Debt (new ed. ISLET 2009), chapter 16.
Bank of America (BAC) is selling $1.2 billion of mostly delinquent home loans, meeting investor demand for soured mortgages. Per Bloomberg:
The company is selling five pools consisting of nonperforming debt, loans that have been modified and resumed payment, and some that havent defaulted, according to a person with knowledge of the matter. Four of the pools are being serviced Bank of America and one is managed by Ocwen Financial Corp., said the person, who asked not to be identified because the planned sale is private.
The banks might make up to $400 million a year by raising interest rates on home loans, but it would come as a hard blow to first time home buyers. The ANZ Bank Group last week announced that it is planning to limit lending to landlords by raising the index rate by 0.27 percent to 5.56 percent on the investors loan.
The move by ANZ would add another $40 to a monthly payment of $300,000 on mortgages. The Commonwealth Bank of Australia (CBA) followed suit the very next day and the National Australia Bank (NAB) on Monday also raised its interest-only home loans by 0.29 percent.
Andrew Wilson, senior economist of the Domain Group, said that tenants are soon going to feel over burdened with the hefty monthly payments, particularly in Sydney which faces a chronic shortage of properties, and Melbourne where only 2 percent of the houses are vacant and the average rent for properties are already high.
Domain reported that Mr. Wilson, however, expects Perth to be the least affected city as it has the highest vacancy rate at 3 percent. Certainly for landlords that are in areas which are popular, it gives them the opportunity to push rents up, Dr. Wilson said. If they cant, theyll absorb it, but if they can, it will become part of the factor that drives up rents in areas where there are higher demand for rental properties.
The reasons behind the higher rate of interest for property lending are many. According to the Australian Financial Review, low interest rates in Sydney and Melbourne have so far been responsible for the high house prices, which property investors have been trying to make the most of. Matt Comyn, the group executive for retail bank services of CBS, said on Friday that at the industry level, approval of loans for investors has gone up by 22 percent compared to the last year.
Contact the writer at firstname.lastname@example.org , or let us know what you think below.
Investment firms such as John Grayken#x2019;s Lone Star Funds; Bayview Asset Management, a Coral Gables, Florida-based company backed by Blackstone Group; and Houston-based Selene Finance, with investors including bond pioneer Lewis Ranieri, have been some of the biggest buyers of delinquent home loans. In addition to banks, the US Department of Housing and Urban Development, Fannie Mae and Freddie Mac are selling the debt.
Real estate loans’ performance
Residential real estate loans declined by 0.4% in April on a seasonally adjusted annualized basis. They increased by a meager 0.3% in May 2015. Revolving home equity loans have been declining–down by 4.2% in May 2015. Commercial real estate loans were up by 5.8% in May. The growth was 12.5% in March and 5.5% in April.
Overall real estate loan growth declined from 7.9% in March to 2% in April and 2.8% in May 2015. The total amount of residential real estate loans across all of the commercial banks stood at $2.05 trillion in the week ending June 3, 2015, while total real estate loans were $3.7 trillion. Residential real estate loans peaked at $2.2 trillion in 2009. They haven’t crossed that level since then.
Source: flickr user The Truth About.
While applying for a mortgage recently, I was rather surprised at some of the loan options I was offered. Banks are now offering interest-only mortgages, balloon loans, and stated-income loans, and thats just what I found in my brief shopping experience. And while I wound up going with a traditional fixed-rate mortgage, the resurgent availability of these loan products definitely caught my attention. To give you an updated picture of todays mortgage market, heres a rundown of the types of loans that were widespread in the mid-2000s, whether theyre available today, and whether we should be concerned about a repeat of the crash.
Which mortgage types are making a comeback?
Here are some of the exotic mortgage loans that were common before the financial crisis, and whether they exist today.
1. Interest-only mortgages: Essentially, these loans require borrowers to pay only the interest for a certain number of years, while the principal stays constant. After the interest-only period is up, the monthly payments will rise and the principal balance will start to be paid down.
These mortgages are definitely making a comeback. Generally, an interest-only mortgage starts with a relatively low interest rate that begins to adjust after a set period. Once the principal repayment starts to kick in, typically in 10 years, the monthly payments drastically increase. In many cases they double or more.
2. Negative amortization loans: These are similar to an interest-only loan, except the payments arent even enough to cover the interest. So instead of being paid off over time, the principal balance grows as a result of accumulation of unpaid interest. For example, with a negative amortization loan, you could buy a $250,000 house, make your mortgage payments as agreed for several years, and then end up owing $300,000. Its easy to understand how many borrowers got themselves into trouble with this kind of mortgage. Thankfully, these are virtually extinct today.
3. Balloon mortgages: A balloon mortgage amortizes over a standard 30-year period, and the payments do chip away at the principal balance over time. However, after a set amount of time (seven years is common), the entire remaining balance is due. These loans come with lower interest rates than standard mortgages, but they have tremendous risk related to the borrowers ability to refinance or sell the home.
Balloon mortgages can be found today and are typically used by buyers who plan to stay in their homes for just a few years, to keep the monthly payments as low as possible.
4. No-doc and Low-doc loans: In the run-up to the financial crisis, there were several types of limited documentation loans. Most famously, there were the NINJA loans — No Income, No Job or Assets — which required nothing but a credit score. Then there were loans that required only asset verification but no income documentation. And finally, there were stated income loans, which still required asset and credit verification but took the borrowers word when it came to income.
There are stated income loans around today, used principally by self-employed borrowers. Every lender I could find requires a 20% down payment, and you can bet the lender will take a closer look at your bank statements and other asset verification.
5. Cash-out refinancing and home-equity loans: These never really went away, but banks standards are much higher today, both in terms of credit and the percentage of the homes value borrowers can take out. Today, most of these loans and lines of credit require a loan-to-value of no more than 80% including the new loan, whereas before the crisis it wasnt uncommon to see home-equity loans or cash-out refinancing loans made for 110% of a homes value, or more.
6. Option ARM: These were perhaps the most dangerous type of loan made before the financial crisis. Essentially, the borrower could choose how much to pay each month on the loan for the first two or three years, even if it didnt cover the interest. During 2005 and 2006, approximately 10% of all new mortgages were option ARMs, and many borrowers found themselves owing hundreds of thousands of dollars more than their homes were worth once the market collapsed and the teaser period ended. Fortunately, these are a thing of the past.
7. Subprime loans: This is a broad term that refers to any loan made to borrowers that dont meet traditional, or prime credit standards. Subprime borrowers still have options today, like FHA mortgages, but lenders take a closer look at the qualifications than they used to.
Still, subprime loans represent a large percentage of potential homebuyers, so we definitely need responsible subprime lending. As long as subprime loans are made to borrowers who have the ability to pay them back, theres nothing inherently wrong with them, despite the negative image associated with the word subprime.
Dont worry (yet)
Although the mention of some of these mortgage products may conjure up images of foreclosure signs, the reality is that many of them have a legitimate place in a healthy housing market. For example, stated income loans make homeownership accessible for successful self-employed borrowers who cant provide two years of W-2s. Interest-only and balloon mortgages make sense for people who plan to hold on to their homes for just a few years and want to keep expenses low.
The bottom line is that as long as the qualification process for these as well as traditional mortgages remains reasonably tough, theres no need to worry. However, if you have a low credit score, no income documentation, and no down payment, and you get offered an interest-only mortgage, then it may be time to panic.