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We hate to be all doom and gloom about Washington's homeowners, but it's looking all doom and gloom for Washington's homeowners--at least for the fair

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Our Subprime Time Is Coming

foreclosuresign.jpg
We hate to be all doom and gloom about Washington's homeowners, but it's looking all doom and gloom for Washington's homeowners--at least for the fair number paying a high premium for their mortgages. And African-Americans and Latinos were more likely to be paying that high premium.

According to a study released yesterday by the Washington Budget & Policy Center, here's why things look so bad:

To begin, a lot of Washington's adjustable rate mortgages--the mortgages that go from affordable payments to all-of-a-sudden unaffordable ones--haven't yet adjusted. One in three Washingtonians with this type of mortgage hasn't been hit yet by the big increase in payments. Nationally, it's more like one in five.

What's more, Washington's among the national leaders in prepayment penalties--which is when the lender penalizes you for paying off your mortgage before you were scheduled to--and subprime loan balances. So basically, Washingtonians are going to be paying a lot of interest for a long time. Or they'll be failing to pay it and facing foreclosure. (At which point they'll catch the eye of this guy.)

Who'll be hit the hardest? High-cost mortgages are most common among low-income homeowners and, notably, among blacks and Latinos--irrespective of income levels. (While it's not necessarily the case, a higher income level generally indicates an

ability to qualify for a better loan.)

"What is particularly troubling about the findings in this report is that it appears people of color with higher incomes are getting high-cost loans," says Alexes Harris, Assistant Professor of Sociology at the University of Washington, in a press release. "These findings suggest more needs to be done to ensure lenders inform borrowers of all the types of loans they are qualified to receive."

Pierce County has the state's highest rate of high-cost loans, at 31%. By contrast, King and Snohomish were among the lowest, at a combined 21%.

To deal with this mess, the legislature has no fewer than nine bills this session relating to mortgages, reverse-mortgages, and general mortgagery. Last year, it passed a bunch of reforms recommended by a governor's panel.

Among them were expanded financial literacy programs, requirements to make terms more understandable to the layperson, and limitations on and greater penalties for predatory loans. It also created the Smart Homeownership Choices Program, which is supposed to give emergency loans to people facing foreclosure, but apparently hasn't given any loans out yet.

The study's author says we should emulate North Carolina's foreclosure prevention program, which requires lenders who intend to foreclose to notify the state and pairs borrowers with counselors who review the loan, have the power to extend the foreclosure date, and help renegotiate.

Finally, CNBC's Rick Santelli says homeowners who face foreclosure are losers and shouldn't get help. The fellas on the floor of the Chicago Board of Trade seem to agree with him. Then Jon Stewart had a sublime eight-and-a-half minutes of fun at their collective expense.

 
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