Legal Briefs

By Bruce Bronster, Esq., Real Estate Business Magazine, April/May 2007

Subprime Mortgages and the Economy

REALTORS® everywhere need to know what steps the federal government is taking to tighten the guidelines for the subprime mortgage market, and what, if any, restrictions may be in the works regarding buyer qualification guidelines.

As the once-hot housing market has gone cold in many parts of the country, both Wall Street and Washington, D.C., are increasingly concerned about whether the growing wave of defaults in the subprime market will cause serious damage to the entire mortgage market and to the wider economy. Now, the Federal Reserve is considering tougher rules as Congress demands action. These stricter rules may curb lending in the riskiest segments of the market, but much of the damage may already have been done as "payment shock" on adjustable mortgages leads more current borrowers to default.