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• High-risk mortgages have facilitated those with low credit scores to become homeowners. Subprime loans can be of the high risk variety. Subprime loans are typically mortgages to borrowers with credit scores of 620 or below. With a low credit score, lenders typically must charge a higher interest rate. Interest rates charged on a subprime loans are typically adjustable-rate mortgages (ARMs). A garden-variety ARM has a low interest rate period for the first two or three years. However, after the introductory period, interest rates go up resulting in higher monthly mortgage payments.

• Fast Facts:

  1. Federal Housing Administration (FHA) insures over 34 million home mortgagesOfficial Website: About the FHA
  2. June 2008 FHA expects to lose $4.6 billion due to high default rates on home loansThe New York Times: F.H.A. Faces $4.6 Billion in Losses(June 10, 2008)
  3. The FHA expects to help 500,000 people refinance their home mortgages in 2008

• Bernanke on Subprime Mortgage CrisisFederalReserve.gov: [http://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm May 17, 2007 Speech]

  • "Looking forward, the Federal Reserve, other regulators, and the Congress must evaluate what we have learned from the recent episode and decide what additional regulation or oversight may be needed to prevent a recurrence"— Bernanke, at At the Federal Reserve Bank of Chicago
  • "I believe that, in the long run, markets are better than regulators at allocating credit."— Bernanke, at At the Federal Reserve Bank of Chicago

• Related Mahalo Pages

  How to Buy a House That is for Sale By Owner | Citigroup Bailout | Subprime Mortgage Crisis | Subprime Mortgage Bailout | Housing Bubble | Mortgages | How to Refinance a Mortgage | How to Get a Mortgage | Buying a Home | Selling/Renting a Home | Christopher Dodd | Ben Bernanke | FHA Refinance Loans | Countrywide Foreclosures | Citigroup Crisis | How to Stop Foreclosure | How to Become a Repo Man | How to Refinance a Mortgage to Prevent Foreclosure | How to Avoid Foreclosure on a Fannie Mae Mortgage | How to Modify Your Mortgage | How to Avoid Foreclosure | How to Avoid Foreclosure with a Mortgage Modification | How to Sell a Structured Settlement

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