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.

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Fraud, abusive lending crushes dreams for millions of home owners

Mark and Kerrie Russo, a Jackson, N.J., couple raising two young daughters, are struggling to hang on. Less than a year after buying a home in 2005, which they financed with a 30-year fixed rate loan based on a solid credit history, a local mortgage broker began sending letters offering to refinance their loan. A new product, the sales pitch said, allowed home owners flexibility to choose from a menu of different payments from one month to the next.

What the broker didn’t explain, Kerrie Russo says, is that this was a “negative amortization” loan — an expanding debt that buried the couple deeper in hock even as they thought they were paying down their mortgage balance.

Like many borrowers who were sold mortgages they couldn’t afford, Russo says that when she called the broker to complain, she was told that because she failed to read the fine print, the responsibility for getting in too deep was hers.

After coming up with about $14,000 to get out of the downward spiral into yet another loan, Russo says she’s learned an important lesson.

“I have learned a new term called ‘predatory lending,’” she said. “And that is what I am a victim of.”

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Efforts by major banks and Wall Street firms to unload bad U.S. housing loans are speeding up a shakeout in the subprime mortgage industry.

As more Americans fall behind on mortgage payments, Merrill Lynch & Co. (NYSE: MER), J.P. Morgan Chase & Co. (NYSE: JPM), HSBC Holdings PLC (NYSE: HBC) and others are trying to force mortgage originators to buy back the same high-risk, high-return loans that the big banks eagerly bought in 2005 and 2006.

Merrill demanded in December that ResMae Mortgage Corp. — which in 2006 sold it $3.5 billion in subprime mortgage loans, or loans to borrowers with poor credit records — buy back $308 million of loans whose borrowers had defaulted. In a filing this week for bankruptcy law protection, ResMae said those demands “crippled” its operations. The Brea, Calif., company said that repurchase requests were “severe and unexpected.”

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