More than 10 percent of all home loans made in Montgomery County in Maryland in 2004 were subprime, or given to people with less than stellar credit history.
Dramatic increases in foreclosure and late payment rates in this mortgage market, along with the decision by many lenders to stop offering subprime loans, led to steep losses on national stock exchanges in the recent weeks. In the national capital region, the subprime meltdown has sparked fears that areas where these mortgages are concentrated could face a spate of foreclosures, depressing property values and causing social welfare problems.
According to the Washington-based Urban Institute, the largest number of subprime mortgages are concentrated in Maryland’s suburbs. Prince George’s County led the region with subprime loans accounting for more than one in four issued in 2004.
But the high number of these types of loans in the more affluent Montgomery County – as well as Fairfax County, where 8 percent of all loans in 2004 were subprime – show that these loans are not only concentrated where incomes are lower and traditional home mortgages are harder to get.
In a recent interview with The Examiner, Urban Institute Senior Research Associate Peter Tatian said in more affluent communities, homeowners use subprime mortgages to borrow against the value of their house for renovations, or to upgrade to a bigger house.
“Many folks are relying on subprime loan refinancing,” he said last week. “It wasn’t a good option to begin with, but it was some way to raise money.”
