Despite having three times as many subprime mortgages as the national average, and a foreclosure rate among the highest in the country, Virginia, Maryland and the District have few protections against predatory lending.
About 11 percent of all mortgages in the national capital region are given to people with poor credit, compared with about 3 percent nationally. In Prince George’s County, 26 percent of mortgages are subprime.
In addition, according to the nonpartisan Center for Responsible Lending, the D.C. metro region ranks ninth in the country in foreclosure rates for subprime mortgages [see sidebar]. The area has seen dramatic increases in the number of foreclosuresin recent years.
New worries about subprime mortgages were raised recently after an increase in foreclosures caused many lenders to go under; failures that played a part in the last week’s stock market slide.
Some lenders, including McLean-based Freddie Mac, have recently announced they will no longer buy subprime mortgages that have a high likelihood of foreclosure. The federal reserve has also warned of the steep risks associated with these types of loans.
Local governments, however, have remained relatively silent. Ward 3 Councilwoman Mary Cheh has introduced legislation providing some protections for homeowners, but the bill is still in the early stages.
“This is a huge topic now with the way the economy is going,” Northern Virginia Association of Realtors spokesman Jill Landsman said. She said some states — Colorado, for example — have created protections for homeowners in danger of foreclosure.
Mortgage lenders oppose any regulation of the market.
“The private market is going to be much better at changing the market to be in line with what investors are expecting,” Mortgage Bankers Association Senior Economist Mike Fratantoni said. “The market can operate better without getting regulatory agencies involved.”
