Loose Standards, Big Trouble ; for Many, Mortgage Terms Looked Good at First

Summary

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El Paso County's mounting foreclosure problem has its roots in the national meltdown of mortgages: unscrupulous lenders making loans to borrowers with shaky credit history using loans that had little chance but to go bad.

In many cases, local homeowners facing foreclosure have subprime loans -- loans made with loose credit requirements and such exotic- sounding features as interest-only payments and negative amortization, a Gazette analysis of mortgage data shows.

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Loose Standards, Big Trouble ; for Many, Mortgage Terms Looked Good at First

The surge of foreclosures stems from efforts to stretch lending standards for borrowers. The loans often were made to borrowers with no down payment, bad credit or low incomes.

What borrowers got were mortgages they didn't understand that would later doom them to default and lose their homes, experts say.

Subprime mortgages typically are marketed with a low promotional rate that allows the borrower to qualify for the loan. That rate usually expires after two years and increases by as much as 5 percentage points, increasing the monthly payment by up to 40 percent.

Withou...

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