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    A Snapshot of Subprime Lending in North Carolina
    The subprime foreclosure crisis has caused enormous economic upheaval all over the nation, and North Carolina is no exception. Foreclosure starts in North Carolina have increased three fold in recent years. Subprime mortgages are high-cost home loans intended for people with weak or blemished credit histories. The subprime market has been rife with problems that are rare in the mainstream prime market: excessive fees, high penalties for refinancing, refinances that provide no real benefit to homeowners and steering families into more expensive loans when they qualify for a better rate. In recent years, subprime lenders and brokers flooded the market with dangerous mortgages that came with “exploding” adjustable interest rates and other high-risk features. When borrowers expressed concern, lenders told them not to worry: “You can refinance later.” Today very few homeowners struggling with abusive subprime loans will be able to sell or refinance, and the entire economy has been damaged by reckless lending.

    Subprime Spillover: Foreclosures Cost North Carolina Neighbors $861 Million
    In this report, we estimate how many homes—including families who are paying their mortgage on time—will suffer a decline in property values because of foreclosures in their neighborhoods. We also estimate how much the average family will lose in home equity, and how much of an impact the foreclosure crisis will have on city and county coffers. When a home goes into foreclosure, the negative effects experienced by the family who is losing its home "spill over" to surrounding neighbors and the wider community. Specifically, published research indicates that a foreclosure on one home lowers the price of other single-family homes nearby.

    Defaulting on the Dream: States Respond to America’s Foreclosure Crisis
    At the end of 2007, North Carolina was weathering the national foreclosure storm somewhat better than the average state. North Carolina’s foreclosure inventory was 59 percent of the national rate, according to the Mortgage Bankers Association’s National Delinquency Survey. The state should expect the share of homeowners defaulting on their loans to rise, however, as greater numbers of borrowers who took out subprime loans in 2005 and 2006 head toward foreclosure.

    The Impact of North Carolina's Anti-Predatory Lending Law
    Using an analysis database of 3.3 million subprime loans covering 1998-2002, we find that the reduction in subprime originations observed from 1999 to 2000 is due to a decline in the number of refinance originations, while purchase originations actually increased. Most importantly, we find a large decline in subprime refinance originations with abusive or predatory terms. Overall, we conclude that after the North Carolina predatory lending law was fully implemented, the subprime market behaved essentially as the law intended: There was a reduction in predatory loans but no change in the cost of subprime credit or reduction in access to credit for high-risk borrowers.

    North Carolina's Subprime Home Loan Market After Predatory Lending Reform
    This report presents the following key findings: (1) Subprime home lending continues to thrive in North Carolina; (2) North Carolina borrowers, including low-income borrowers, continue to have access to a wide range of choices when selecting a home loan; and (3) the law is estimated to have saved borrowers more than $100 million. Consequently, this report concludes that the North Carolina lending reform is beginning to have its intended effect of reducing predatory lending while maintaining full access to a wide range of credit choices for the state's homeowners.

    “Flipping” Prohibitions in N.C. Elicit No Substantial Litigation
    This report presents the following key findings: (1) Subprime home lending continues to thrive in North Carolina; (2) North Carolina borrowers, including low-income borrowers, continue to have access to a wide range of choices when selecting a home loan; and (3) the law is estimated to have saved borrowers more than $100 million. Consequently, this report concludes that the North Carolina lending reform is beginning to have its intended effect of reducing predatory lending while maintaining full access to a wide range of credit choices for the state's homeowners.