Foreclosure's shadow falls across diverse set of US homeowners

At the housing boom's peak in 2005, 20 percent of new mortgage loans were subprime, four times the share a decade earlier.

from the April 9, 2007 edition

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Lawrence, Mass. - Victor Castro bought his home four years ago, expecting the move would bring stability. The Massachusetts janitor thought he would no longer move from rental to rental.

Music teacher Al Ynigues bought his home in Minnesota with a similar plan: He expected to be living and teaching there for years to come.

In Michigan, Mary Beyer arranged to refinance her home loan in a bid to bring order to her finances. She was having trouble getting by on her fixed income of disability payments.

Now each faces the possibility of foreclosure. They share a common American dream of homeownership, but what's equally notable is their diversity. Their cases hint at the wide range of people who make up the group called "subprime" borrowers, who are now being hit hardest by a nationwide real estate slump.

They are white as well as black, old as well as young, and middle-income as well as low-income. As the name subprime implies, these loans aren't for the Rockefellers, but for people with rocky credit records. Yet this category of loans saw an unprecedented wave of expansion since 2002, encompassing millions of Americans.

The explanation lies partly in the housing boom itself. As land values pushed toward record highs, many borrowers stretched against their credit limits to afford a home. Lenders, often charging lucrative fees, stood ready to help them.

By the time the housing boom peaked in 2005, fully 20 percent of new mortgage loans were subprime, four times the share a decade earlier.

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