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CRL and MBA Disagree Over Subprime Research

""The Center for Responsible Lending"":http://www.responsiblelending.org/ (CRL) has issued a report defending the organization's latest research on the subject of predatory lending and foreclosures in the subprime market. The CRL report was designed specifically to address questions raised by the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA).
While both agencies support reforms that will curtail predatory lending practices, they differ in their approaches and don't always see ""eye-to-eye"" when it comes to the research. For example, CRL recently estimated that 20-percent of subprime homebuyers in the market will lose their homes within the next few years. The MBA openly questioned that figure by claiming it failed to subtract borrowers who will be able to avoid foreclosure through home sales or refinancing. In CRL's written rebuttal to the MBA, the agency defended its '20-percent estimation' and said the ""study measured both loans that ended in foreclosure and delinquent loans that were cured by refinancing or selling a home."" CRL added that its final estimate strictly covered loans that ended in foreclosure.
According to CRL's latest report, the MBA also suggested that CRL research ""relies on overly pessimistic assumptions about borrowers' ability to pay off their loans and local housing appreciation rates."" In response, CRL said it ""makes no assumptions about a borrower's ability to pay off their loan."" Instead, the agency said it measured the actual performance of six million subprime loans originated over a 7-year period and utilized housing appreciation forecasts that came from an independent research provider.
MBA, which supports flexible and controlled legislation, also differs from CRL when it comes to the agency's overall view of subprime mortgages. While MBA considers subprime loans an important component to increasing homeownership, CRL says the ""loans are typically debt consolidation refinance loans and do not create new homeownership opportunities.""
Click ""here"":http://www.responsiblelending.org/pdfs/CRL-MBA-rebuttal-2-14-07.pdf, to read CRL's full response to the MBA.

About Author: Kerri Panchuk

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