Subprime Woes Afflict Good Credit Risks

Borrowers eligible for standard deals fell for risky loans
By Jim O'Neill,  Newser User
Posted Dec 3, 2007 11:12 AM CST
A realty sign stands in front of one of the many homes that are in foreclosure in the Villages of Queen Creek in Queen Creek, Ariz. in this Sept. 26, 2007 file photo. As the housing market crumbles, homeowners...   (Associated Press)
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(Newser) – Borrowers with shady credit who never should have been allowed near a dotted line weren't the only ones swallowed by the subprime debacle—credit-worthy borrowers received 55% of all subprime loans in 2005, the apex of the subprime surge, reports the Wall Street Journal. Incentive-motivated mortgage brokers put many borrowers into subprime loans, even those who qualified for better, more stable rates.

Experts say the mortgage industry, looking to cash in on the boom, required little or no documentation and steered customers to subprime loans because doing so was easier and more profitable. But borrowers, regulators say, also were to blame, signing documents they didn’t understand. In the end, many borrowers who planned to refinance were caught by falling prices and tighter credit.