Fairfax County had the second- highest number of subprime mortgages in the national capital region in 2004, according to the Urban Institute.
Fairfax trails Prince George’s County, where 26 percent of all mortgages were subprime loans given to people with less than stellar credit history. For the entire region, more than 11 percent of mortgages fell into this category, 6 percent higher than the national average.
Dramatic increases in foreclosure and late payment rates in the subprime market, along with the decision by many lenders to stop offering these loans, have caused steep losses on Wall Street in recent days. It has sparked regional fears that areas where subprime loans are concentrated could face a spate of foreclosures, depressing property values and causing social welfare problems.
A recent report from the Center for Responsible Lending, which found more than 22 percent of homes purchased with subprime mortgages in the area last year will be forced into foreclosure, supports these fears.
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The number of subprime loans in Fairfax — where median household income is $94,600, according to the most recent U.S. Census figures — shows these instruments are not only popular in places where incomes are lower and typical mortgages are harder to secure.
It also raises the question as to whether people with these types of loans are at the same risk as those with lesser means.
Urban Institute Senior Research Associate Peter Tatian said in more affluent communities like Fairfax, homeowners overextend themselves by using subprime mortgages to borrow against the value of their house for renovations, or to upgrade to bigger homes.
“Many folks are relying on subprime loan refinancing,” he said. “It wasn’t a good option to begin with, but it was some way to raise money.”
“A lot of people are using their home like an ATM,” Center for Responsible Lending spokeswoman Sharon Reuss said. “They’re borrowing against the value of their house” and have trouble making payments.
Others, including John McClain, a senior fellow at George Mason’s Center for Regional Analysis, said Fairfax ranking second in the region in subprime mortgages surprised him. He said because of high incomes and households with two workers, the area would be insulated from many problems associated with these loans.
