FHA Mortgages & Quickie Subprime Loans

by Peter G. Miller
August 8th, 2007

Writing in the Seattle Post-Intelligencer, an excellent newspaper, columnist Bill Virgin says “a report from the Mortgage Bankers Association, showing that the average age of all types of housing loans (prime, subprime, FHA and VA, fixed and adjustable) was, as of the fourth quarter of 2005, three years. The average for subprime ARMs was just two years.

“Some of that can be blamed on low interest rates and a good economy,” he continues, “which encouraged many people to buy. Some can be blamed on the refinancing boom. Some could even be attributed to the peripatetic nature of Americans (that’s a $5 word that means we move a lot). But might not some be blamed on loans taken out to buy and flip properties in a rising market?”

I think the column, entitled “All home buyers are looking for a payoff,” is on the right track — but not totally.

Isn’t one argument (not my argument) for subprime loans that they are supposed to be “short-term” financing, loans replaced when the borrower’s credit improves? If yes, would that not explain the shorter subprime loans?

Just thinking out loud, that’s all.

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