georgeragsdale

Bill Gross on the Housing Market and Subprime Lending

I agree with Van Walleghem. Sub prime loans are set up to fail and generate fees to the mortgage brokers and lenders. The typical mortgage does not have a prepayment penalty, and unlike subprime escrows for realestate taxes and insurance. A sub prime borrower is thus hit not only with a rate increase after expiration of the low introductory interest rate but tax and insurance bills that were probably not budgeted for,thus requiring another refinance and more fees to the mortgage brokers.

Bill Gross on the Housing Market and Subprime Lending

It's not only housing. The same thing has been going on in the financing of commercial realestate.