Subprime loans face big hikes by Delia Cruceru

Subprime loans are now dominating the economic news, from worse to worse. An increase of several hundred dollars is expected by million of houseowners from U.S., as the interest rate on their home loan is going up. "The meltdown in the subprime market is the biggest threat to the housing market and the broader economy," says Mark Zandi, chief economist at Moody's Economy. com. "It is at the vortex of the problem." In October the loans will be reset and the rates on almost $50 billion worth of mortgages will rise with 2 percents or more. James Kragenbring, senior investment officer at Advantus Capital Management in St. Paul, Minn estimates: "For example, on a $210,000 loan balance (the average subprime amount in 2006), the additional 2.5 percentage point increase on the interest rate adds about $4,560 a year, or about $380 a month." This will mean a serious hit over the wallets, as many people can't afford to pay the debt because mortgage payments are rising faster than their income: "If the borrower is on Social Security, the most their income is rising is 3 percent a year and the mortgage payments are rising much faster than that," says Carol Brent, staff attorney of Legal Services for the Elderly. They can expect now that delinquencies will go up, loans from last year having a rate of 15% delinquencies.

related story: http://news.yahoo.com/s/csm/20070830/ts_csm/asubprime;_ylt=AvnFt0yNRrPiPG.dFF3sguis0NUE

by Delia Cruceru for PocketNews (http://pocketnews.tv)

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