The Skinny on Seattle’s Subprime Situation
Open houses this weekend:
Sunday, October 14, 2-5pm
526 1st Ave S #222
Seattle, WA 98104
Sunday, October 14, 1-4pm
24416 16th Ave S
Des Moines, WA 98198
Recent posts on Sweet Digs Seattle:
- Map Apps: Northeast Open Houses
- Eastside Fixer-Uppers and the Seattle Home Show
- Seahawks, Saints and an Open House
Imagine stretching to purchase a $460,000 home with an adjustable rate subprime mortgage. You figure you can refinance before your interest rate resets to a truly exorbitant amount which will raise your monthly house payments higher than your monthly paycheck. But then prices of comparable homes in your area fall, which means you wouldn’t qualify for a new $460,000 mortgage. Yikes! This is what happened to a woman in Las Vegas and what is percolating across the country. The Wall Street Journal has a must-read article on the United States of Subprime with an analysis of loan data from 2004 to 2006.
About a third of home loans originated last year were subprime. Subprimes were originally designed to provide possibilities to low-income, high-risk buyers but recently have been used by middle and upper income buyers to attain homes beyond their means.
The Journal’s findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system — and now are bringing deepening woe.
Our local big bank Washington Mutual joined the party of providing these high risk loans all over the country and may have challenges ahead as a result. I wonder how that will impact WaMu jobs in Seattle?:
Ambitious lenders such as Seattle-based Washington Mutual’s Long Beach Mortgage, which between 2004 and 2006 made $48 billion in high-rate loans, used armies of outside brokers to push subprime loans into the suburbs. (A company slogan: “The Power of Yes.”) The result was a mortgage bonanza that reached every racial and ethnic group, income level and geographic area.
So where does Seattle fit into the nation-wide subprime picture? We’re in the top third of the stack in terms of number of high-rate loans with California, Texas and Florida leading the list.
Many loans at risk of going bad have not yet done so. As much as $600 billion of adjustable-rate subprime loans, for example, are due to adjust to higher rates by the end of 2008, which means that more and more borrowers are likely to fall behind.
