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Here's the living room, still covered in the worn blue shag that Angela Sneary always intended to replace with hardwood. And downstairs is the basement, where her husband, Tim, was going to knock out a wall and put in a foosball table.
Many families, though, likely never would have become owners if not for the tremendous growth over the past decade of subprime lending. It long seemed like a winning proposition for all parties. Now, the costs are becoming apparent, and they are very unsettling.
Subprime lenders peddle new kinds of mortgages, often requiring no money down and made at "teaser" interest rates that soon rise. They market to borrowers with weak credit or questionable incomes.
But as the housing market cools, thousands of subprime borrowers are struggling to keep their homes. In some particularly hard-hit neighborhoods in Denver's suburbs, home after home sits dark.
Sixteen years later, Angela's dad died. Tim, just out of the Navy, went to pay his respects. He offered his arms to Angela -- and never let go.
The new family grew fast. A year after Amanda was born, Timmy Jr. followed and three years later came Steven. Tim found work doing landscaping; Angela got a job working for an insurance company. Eventually, they combined to make about $55,000 a year.
They loved the second house the agent showed them. It was painted glowing pink with a big shade tree out front. It had spacious bedrooms for all three kids.
More than two years and 100 homes later, agent Kent Widmar says he has no memory of the couple or the deal. But he knows his customers, and subprime loans are the only loans most can get.
But at the closing in August, all the numbers were higher. The Snearys were offered two loans, both from a Texas subprime lender, Sebring Capital Partners. The first, for 90 percent of the purchase price, was at 8.31 percent, set to adjust after two years. The second, for the remainder, was at 13.69 percent.
Looking back, Tim wishes they'd asked more questions or considered walking out. But everything was in boxes, and they'd given notice. So they signed the papers.
"When we were children, the lender was a savings and loan -- just like in It's a Wonderful Life," said Oliver Frascona, a Boulder, Colo., lawyer whose firm represents many lenders in foreclosure proceedings, including the Snearys. "The lender was loaning their own money ... so they were very careful with how they lent it."
Today, many buyers find loans through a mortgage broker. Many of those loans come from loan originators. These companies hold the loans briefly before reselling them, earning a profit and passing along the risk.
The mortgages are usually bought by a bank or Wall Street firm. Sometimes, a loan-servicing company, which pockets a fee for administering each mortgage, acts as a go-between. Then the loans are bundled and resold as securities to investors.
The new system works well in many ways, but the incentives driving the players are very different. The mortgage broker and loan originator, rather than being restrained by risk, pursue the profit that is the reward for generating new business. An enthusiastic Wall Street provides cash for yet more loans.
Often, buyers qualify for these loans only because they can afford payments at the introductory rate, without considering how they'll make good once the rate goes up.
"House prices are no longer the lifesaver they were for people in good times," said Ellen Schloemer of the Center for Responsible Lending, which recently projected a sharp rise in subprime foreclosures in the next few years.
For a few months, anyway, they kept pace with the costs. But as 2004 ended, Tim's employer, who had already laid him off and called him back, sent him home for good.
By then, their loan had been sold. The new loan servicer, Homecomings Financial, told them they'd need to catch up and set up a payment plan. The Snearys' monthly bill jumped to $1,920.
The lender said "You're going to have to pay ... or we'll have to go to foreclosure," Tim said. "Well, I guess I'm going to have to go foreclosure because I've given everything I have to give, and you can't squeeze blood from a turnip."
The lack of bids gives Tim and Angela more time to move out. They hope that will be enough to find a buyer who'll satisfy their lender and keep foreclosure from staining their record.
But even if that doesn't happen, the couple has reached an unexpected truce with failure. After two years of fighting to hold on to a house, there's soothing relief in losing. Finally, there's a chance to rest, to crawl out from under the pressure.
But the next time will be different, Tim and Angela say. They'll stay within their means. They'll borrow more intelligently. And they already know just where to find a deal.
This is cache, read story here
Here's the living room, still covered in the worn blue shag that Angela Sneary always intended to replace with hardwood. And downstairs is the basement, where her husband, Tim, was going to knock out a wall and put in a foosball table.
Many families, though, likely never would have become owners if not for the tremendous growth over the past decade of subprime lending. It long seemed like a winning proposition for all parties. Now, the costs are becoming apparent, and they are very unsettling.
Subprime lenders peddle new kinds of mortgages, often requiring no money down and made at "teaser" interest rates that soon rise. They market to borrowers with weak credit or questionable incomes.
But as the housing market cools, thousands of subprime borrowers are struggling to keep their homes. In some particularly hard-hit neighborhoods in Denver's suburbs, home after home sits dark.
Sixteen years later, Angela's dad died. Tim, just out of the Navy, went to pay his respects. He offered his arms to Angela -- and never let go.
The new family grew fast. A year after Amanda was born, Timmy Jr. followed and three years later came Steven. Tim found work doing landscaping; Angela got a job working for an insurance company. Eventually, they combined to make about $55,000 a year.
They loved the second house the agent showed them. It was painted glowing pink with a big shade tree out front. It had spacious bedrooms for all three kids.
More than two years and 100 homes later, agent Kent Widmar says he has no memory of the couple or the deal. But he knows his customers, and subprime loans are the only loans most can get.
But at the closing in August, all the numbers were higher. The Snearys were offered two loans, both from a Texas subprime lender, Sebring Capital Partners. The first, for 90 percent of the purchase price, was at 8.31 percent, set to adjust after two years. The second, for the remainder, was at 13.69 percent.
Looking back, Tim wishes they'd asked more questions or considered walking out. But everything was in boxes, and they'd given notice. So they signed the papers.
"When we were children, the lender was a savings and loan -- just like in It's a Wonderful Life," said Oliver Frascona, a Boulder, Colo., lawyer whose firm represents many lenders in foreclosure proceedings, including the Snearys. "The lender was loaning their own money ... so they were very careful with how they lent it."
Today, many buyers find loans through a mortgage broker. Many of those loans come from loan originators. These companies hold the loans briefly before reselling them, earning a profit and passing along the risk.
The mortgages are usually bought by a bank or Wall Street firm. Sometimes, a loan-servicing company, which pockets a fee for administering each mortgage, acts as a go-between. Then the loans are bundled and resold as securities to investors.
The new system works well in many ways, but the incentives driving the players are very different. The mortgage broker and loan originator, rather than being restrained by risk, pursue the profit that is the reward for generating new business. An enthusiastic Wall Street provides cash for yet more loans.
Often, buyers qualify for these loans only because they can afford payments at the introductory rate, without considering how they'll make good once the rate goes up.
"House prices are no longer the lifesaver they were for people in good times," said Ellen Schloemer of the Center for Responsible Lending, which recently projected a sharp rise in subprime foreclosures in the next few years.
For a few months, anyway, they kept pace with the costs. But as 2004 ended, Tim's employer, who had already laid him off and called him back, sent him home for good.
By then, their loan had been sold. The new loan servicer, Homecomings Financial, told them they'd need to catch up and set up a payment plan. The Snearys' monthly bill jumped to $1,920.
The lender said "You're going to have to pay ... or we'll have to go to foreclosure," Tim said. "Well, I guess I'm going to have to go foreclosure because I've given everything I have to give, and you can't squeeze blood from a turnip."
The lack of bids gives Tim and Angela more time to move out. They hope that will be enough to find a buyer who'll satisfy their lender and keep foreclosure from staining their record.
But even if that doesn't happen, the couple has reached an unexpected truce with failure. After two years of fighting to hold on to a house, there's soothing relief in losing. Finally, there's a chance to rest, to crawl out from under the pressure.
But the next time will be different, Tim and Angela say. They'll stay within their means. They'll borrow more intelligently. And they already know just where to find a deal.
This is cache, read story here
