D.C. officials are so concerned about the impact of the collapsing subprime mortgage market that they will spend hundreds of thousands of dollars to study the lending practice and its use within the nation’s capital.
The Department of Insurance, Securities and Banking recently awarded a $234,750 contract to the Center for Responsible Lending for an analysis of local subprime lending — those risky high-interest mortgages secured by homeowners with limited or poor credit history.
The nationwide subprime market is in complete meltdown. As interest rates on the loans adjust higher, homeowners can’t keep up with their mortgages and foreclosures skyrocket.
Leslie Parish, a researcher with the Center for Responsible Lending, said her organization will use focus groups, telephone surveys and reams of data to break down what mortgages are most common among District homeowners, who in the city has made use of subprime loans, and how to help those same people become more financially secure through outreach and financial education.
She said she expects to find that subprimes are popular in the District.
“I would expect so, especially because of the rising of cost of housing people are really trying to stretch themselves to get into home ownership,” Parish said.
The D.C. study, which should be complete by January, also will include work by The Urban Institute, The Reinvestment Fund, the National Community Reinvestment Coalition and the Capital Area Asset Builders.
Ward 3 D.C. Council Member Mary Cheh, who has oversight of the insurance and banking industries, said she’s introduced two bills ahead of the study, one tackling mortgage scams and another requiring interest and payment disclosures well before closing.
“Based upon what they find I might have additional legislation,” Cheh said of the study, “but I’m not waiting for it.”
Increasing foreclosures have made it much more difficult for people even with good credit to obtain mortgages. The impact is considerable for future homeowners and developers looking to fill new residential complexes in up-and-coming areas such as Petworth, Columbia Heights or Anacostia.
