Borrowers exploited

Duffy Gilligan gets it wrong in his Aug. 24 Point of View piece "The hope lenders offer."

First, it wasn't just credit dregs (as Gilligan so kindly put it) who got subprime mortgage loans. Studies show that as many as 1 in 5 borrowers who could have qualified for prime loans were steered into subprime loans.

Second, most subprime borrowers were pushed into adjustable-rate mortgages with monthly payments that jumped 40 percent to 50 percent after two years -- they were almost never told they could get a fixed-rate loan at a percent higher interest rate (about $93 per month on a $175,000 loan).

Third, borrowers who did improve their financial situations were prevented from refinancing into better loans because lenders saddled them with prepayment penalties.

Finally, it's nonsense to say a family is better off buying a home even if they lose it after a year. They will see a drop in their credit rating that makes any type of credit more expensive. Then it will take them almost a decade to get into another home, according to the U.S. Department of Housing and Urban Development.

Gilligan is right that we shouldn't return to the mortgage lending business of the 1980s, but what we've seen in the past few years has been just as bad, or worse.

Ellen Schloemer

Raleigh

(The writer is research director for the Center for Responsible Lending.)