Mortgage crunch hits prime borrowers
A real estate for-sale sign offers a reduced price in Ramona, Calif.
TEXT OF INTERVIEW
Tess Vigeland: It's been a little over a year since the phrase "subprime crisis" entered our collective conscience. The mortgage meltdown has been explained mostly by subprime borrowers getting loans they could not afford, but they're not the only ones who did.
As the New York Times pointed out this week, a good chunk of homeowners with good credit took a similar road using adjustable-rate and interest-only mortgages.
We heard from one of them this week. Douglass Kim is a homeowner in Steamwood, Illinois.
Wwelcome to the program.
Douglass Kim: Sure, nice to be here.
Vigeland: When you purchased your home, could you have gotten a traditional 30-year fixed mortgage?
Kim: I actually started out with a 30-year traditional mortgage and the rate was quite high compared to what I thought I would get.
Vigeland: And that's when you refinanced into an interest-only loan?
Vigeland: What drew you to that option?
Kim: The mortgage broker was one of my friends. I actually told him that my first priority was to pay off a high-interest credit card, so I asked him to set up a mortgage that required the minimum amount of payment per month.
Vigeland: And how long was the loan designated interest only?
Kim: Actually, I am not sure about this because I was kind of ignorant at the time and I wasn't really well educated as I am now, but I'm thinking it's five years.
Vigeland: So when would you have to start paying principal?
Kim: About two years.
Vigeland: Will you be able to afford the payments if you are not able to refinance before you have to start paying principal?
Kim: Well, I am hoping that the housing market will get better and my house value will go up to the level where it was, but I am not in a position where I have to foreclose or anything, so I'm not too worried about that, but I just don't like suffering for someone else's problems.