Risky home loans off the market

Nancy Marshall-Genzer Feb 14, 2007


SCOTT JAGOW: The last few years, buying a home has kinda been a piece of cake. Probably too easy. Now, a major mortgage lender says it’s gonna stop making those risky loans that helped a lot of people get into the market. Nancy Marshall Genzer reports.

NANCY MARSHALL GENZER: Time was, you had to make the down payment on your house in cash.

But when housing prices shot up, a lot of people couldn’t afford to do that, so banks made so-called “piggy back” mortgages, which people used for their down payments.

But home buyers are starting to default on those loans. That’s why lender Fremont General has decided to stop offering them.

Banking consultant Bert Ely says other banks have done the same, dampening demand for houses.

BERT ELY: We’re seeing some of the air coming out of the housing bubble of recent years and I think many, myself included, believe this is going to further compound the problems in the housing market and lead to a further weakening of housing prices.

But Ely says the housing market will be healthier as risky loans are weeded out. He says the market will start to recover next year.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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