According to the Mortgage Bankers Association, subprime
mortgages totaled almost 20 percent of all new home loans last year, a
Washington-based trade group. When U.S. growth slowed and home prices stopped
rising last year, delinquencies mounted. About 13 percent of subprime mortgages
made in 2006 were delinquent after 12 months, with 6.65 percent considered
“seriously delinquent,” or more than 90 days late, Standard & Poor’s
estimates. Conservative lending is risk
avoidance and something held as a bank motto.
That appears to have all changed after nearly 7.2 million
“high-interest” or subprime loans made from 2005 through 2007, a
period that marks the peak and collapse of the subprime boom. The analysis
reveals the top 25 originators of high-interest loans, accounting for nearly $1
trillion, or about 72 percent of such loans made during that period.
Investment banks Lehman Brothers, Merrill Lynch, JPMorgan
& Co., and Citigroup Inc. both owned and financed subprime lenders. Others,
like RBS Greenwich Capital Investments Corp. (part of the Royal Bank of
Scotland), Swiss Bank, Credit Suisse, First Boston, and Goldman Sachs &
Co., were major financial backers of subprime lenders. The blame is in part due
to unceasing demand for high-yield, high-risk bonds backed by home mortgages.
Investigation upon investigation will show conclusive evidence
for U.S. and European investment banks having invested enormous sums in
subprime lending. Those banks booked huge
profits prior to bottom falling out of the real estate market. My analysis determined the amount of money
spent by homeowners on their mortgages as a percentage of their income spiked
sharply during the peak of the subprime boom. The analysis surveyed of more
than 350 million mortgage applications reported to the federal government over
a 10 year period through 2007.
Under the HMDA the Home Mortgage Disclosure Act, data from
lenders are collected and reviewed. The purpose is to determine whether the
banks are adequately serving their communities with added emphases on discrimination
against minority borrowers.
mortgages. Starting in 2004, the Federal Reserve’s commenced to gather data encompassing “substantially all of the subprime mortgage market while generally avoiding coverage of prime loans,”.