Subprime mortgages are a function of demand and higher interest rates. If subprime loans are based on rates between 150 to 650 basis points above the prime rate, well at the current prime rate, we won’t see these loans. Here is the question, do you see the prime rate at these current levels forever? You already know the answer to that question.
The demand is already there, but here is what I don’t want to see. I don’t want to see any prepayment penalties. I want the consumer to have to be able to refinance once their circumstances changes. I want them to be able to refinance into lower interest rates as quickly as possible.
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By: Rachel Witkowski
"Subprime mortgages are likely to become harder to make and more expensive to sell based on the new qualified mortgage rule."