Area Realtors and loan officials saying that the rush to judgement against the sub-prime loan market may hurt the ability of people who need special assistance in getting home loans or refinancing their existing loans to do repair work.
"Sub-prime loans are not bad," Daniel Crouse, president of the Warren Area Board of Realtors, said. "It is the abuse of them that has been bad."
The sub-prime loan market has been getting a lot of scrutiny by legislators, federal regulators and others, because some of these loans — often called predatory — have led tens of thousands of people across the country into foreclosure and bankruptcy.
However, Crouse and others are saying that people should not paint all of these loans with the same broad stroke of being bad.
"The sub-prime loan market was created as a way to help borrowers who had difficulties getting conventional home loans," Crouse said. "It was often used for people who worked on commission, moved around a lot or, for whatever reason, did not fit it the mold for traditional home loan borrowers."
Because these loans are riskier, interest rates generally are higher than for those receiving traditional loans.
Today, many sub-prime loans are done for first-time home loans or when homeowners are doing home improvement projects. Estimates are that the market for sub-prime loans increased from 5 percent in the mid-1990s to nearly 20 percent today.
For a long time a lot of Realtors were not aware of the predatory nature of some home loans, said Crouse.
"It could be done without the Realtor's knowledge," he said. "It can be real subtle. Appraisers who help determine the value of properties can report they are more valuable than they are really worth."
The increased scrutiny has reduced the availability of sub-prime loans.
"Over the last several months, we've seen 20 to 30 of the sub-prime loan companies close their doors, so there are fewer of these loans available," Crouse said.
The loss of sub-prime loans has hurt some local mortgage brokerage firms, such as HomeBase Lending, which has offices in Warren and Poland.
"Often, we do have a wider variety of programs than are available at most banks," Mark Klotz, marketing director of HomeBase Lending said.
"We can obtain mortgage loans for people who may not be able to get loans otherwise," he said. "Including people who may have excellent credit scores, but have no visible assets because they are self-employed."
Like area banks, HomeBase Lending manages both fixed rate and adjustable rate loans.
Increasingly, other lending institutions, such as Home Savings Bank, First Place Bank and Seven Seventeen Credit Union are offering educational programs to potential home buyers.
Michael Donadio, senior vice president of lending at Seven Seventeen Credit Union, said those looking for a home should try to get their financing through a local lender that has earned a reputation for reliability and trustworthiness.
"Locally based lenders generally do not want to see their communities hurt as a result of a high turnover of homes and a lot of foreclosures," Donadio said. "They do not want to develop a bad reputation with area residents."
Seven Seventeen, for example, maintains the majority of its loans in its own portfolio, instead of selling them on the secondary market.
Home Savings tries to educate borrowers about the services and try to tailor the loans to their needs.
"We are not going to direct people — especially people buying their first homes — to adjustable rate mortgages, but if they ask questions about these loans we are going to provide the information about them," Marty Sharp, a mortgage loan originator with Home Savings said. "Depending on their circumstances, sometimes they are the best loans for them."