Sub-prime Mortgage Foreclosures Are Increasing

Sub-prime mortgages ending in foreclosures are expected to increase in the coming months. In an article by The Center for Responsible Lending, headquartered in Durham, N.C., it was said that about 2.2 million sub-prime home loans, or 19% of all sub-prime mortgages originated in the last 2 years, will end in foreclosure.

Families with blemished or weak credit histories are typically the candidates for sub-prime mortgages. These types of mortgages carry higher interest rates than prime mortgages. When the borrower can no longer maintain payments on the mortgage, foreclosure occurs when the lender repossesses the property. Oftentimes the borrowers for these sub-prime mortgages do not have enough equity in their homes from which they could sell and pay off the loan, thereby resulting in foreclosure when delinquency occurs.

The value of home ownership is, for most families, their greatest financial asset. With the loss of this home equity due to a foreclosure, the downward spiral into a debt crisis and bankruptcy is a very real possibility.