Suitability standards for loans are essential in debt-flooded America

In light of the current subprime lending melt-down, legislators are engaging in a long overdue discussion of the various forms of debt our nation is mired in and ways of extricating consumers from this quagmire. According to a recent report released by the Center for Responsible Lending (CRL),

subprime loans made during 1998-2006 have led or will lead to a net loss of homeownership for almost one million families. In fact, a net homeownership loss occurs in subprime loans made in every one of the past nine years.

The report also estimates that

overall since 1998, only 9% of subprime loans have gone to first-time homebuyers and hence led to increased homeownership.

Second, a sizeable percentage of subprime loans end in foreclosure—a much higher proportion than prime loans. We estimate that 15.6% of all subprime loans originated since 1998 either have ended or will end in foreclosure and the loss of homeownership.

Finally, CRL concludes that despite concerns about a negative impact on future access to home loans if tougher lending policies are enacted,

the poor record of subprime loans shows that this fear is misplaced. In fact, states that have passed stronger laws in recent years have reduced targeted practices without reducing access to home loans.13 By acting now, policymakers will help ensure that mortgage loans pave the way to sustainable homeownership that truly benefits families and their communities.

Procrastinate on fixing this crisis any longer, and the following popular TV ad will haunt us that much more . . .