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Gloria Edwin Knight à Brooklyn. 
Crédits photo : David Brabyn

Subprime loans put Arizona state in spotlight

Ariz. ranks No. 2 in high-interest mortgages. 

Arizona ranks No. 2 in the country for the highest percentage of subprime loans, those risky, high-interest mortgages that grabbed national headlines last week with the announcement that delinquencies and defaults are rising.

IRS Announces free grant applications '07 LITC Grant Recipients. Pennsylvania Free grant workshop scheduled

related: >>New York Stock Exchange Today's Topic: Rein in risky mortgages? A shock wave hit the housing market, and the U.S. market at large, after delinquencies on risky home mortgages hit a new high, a major subprime mortgage lender was delisted by the New York Stock Exchange, and the Dow fell 416 points one day recently.

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By Cameron England  March 14, 2007 12:00am found at http://www.news.com.au

Shared loans may up house prices

loans: First-time home buyers in Australia are facing growing financial pressures photo © Craig Jewell

ADELAIDE Bank is the first local bank to launch a shared-equity home loan which could make property ownership easier, but analysts warn it could boost house prices.

The announcement came just a day after economic analysis released by the Federal Labor Party claimed housing affordability across the nation was in crisis.

The loan product allows home owners to borrow as little as 75 per cent of the value of their home, after putting up a 5 per cent deposit.

The other 20 per cent will be covered by what is called an equity finance mortgage or EFM.

The borrower pays no interest or principal repayments on this 25-year mortgage, but when they sell the house, the bank gets 40 per cent of the total capital gains. On the upside, if the house declines in value, the bank absorbs up to a maximum of 20 per cent of the losses.

The loan effectively allows people to buy a house up to 25 per cent more expensive than is possible under a traditional home loan.

Adelaide Bank chief general manager, banking, Stephen Small said the bank, and its partner Rismark International had been developing the product for about four years.

"The EFM is an ideal home loan for a first-time buyer lacking the full finances required for entry into the home-owner market," Mr Small said.

"If and only if the property increases in value will the lender be entitled to a share of the capital gains."

If the house loses value, and the bank absorbs 20 per cent of the capital loss, it was effectively a negative interest rate, Mr Small said.

He said the new loan would allow people to buy homes up to 25 per cent more expensive and cut 20 per cent off the cost of their mortgages.

CommSec senior financial analyst Carlos Castillo said that if such loans became widespread, the effect would likely be an increase in house prices.

"If it does become more widespread it does mean there is more demand for properties and people can afford to pay more than in the past," Mr Castillo said.

"I don't think it's outside of the realms of possibility that rather than increasing affordability and keeping house prices where they are, that house prices might just ratchet up by the amount of the benefit that comes from this type of product."

Mr Castillo said this would only happen if other banks took up the product and it became widespread.

"History suggests that if this product does find a market out there then it wouldn't take too long for other players to . . . replicate the product."

Rismark managing director Christopher Joye said the key target market were people who were priced out of the home ownership market, those who already had a mortgage but wanted to free up income, or those who wanted to buy a larger home.

Real Estate Institute of Australia president Mark Sanderson said anything which helped people get out of the renting cycle and into home ownership was welcome.

Australian Consumers' Association spokesperson Nick Coates said consumers needed to make sure they knew what they were signing up for.

"As shared appreciation mortgages become more widely available the things that consumers need to watch on them are how much interest they pay on them," he said.

"By that I mean what it is at the end when you work out how much the house has appreciated.

"The critical thing there is you are satisfied with the valuation and you believe the valuation reflects the value of your house."

Aussie bank unveils interest-free mortgage

related >>Building Credit And Stopping Creditors Life on debt row

As consumer debt continues to swell, Rob Stock goes door-knocking with a collector in south Auckland. In the glow of street lamps, the south Auckland neighbourhood is largely empty, except for the occasional roaming dog or band of youths in hoodies. Fences are tatty, gardens are unkempt, the buildings made mostly from fibrolite....

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