Hoping to stem the tide of the subprime mortgage fallout, the Pew Charitable Trusts announced this week that it will donate $1 million to help educate homeowners and curb abusive lending practices that have helped lead to the current crisis.
Over a two-year span, Pew will give the funds to the Center for Responsible Lending to help strengthen underwriting standards, including verifying a borrower's income, and ensure that borrowers have the ability to repay the mortgage after scheduled increases in the loan's interest rate.
“American families have plenty of financial pressures facing them today and now too many have also fallen victim to mortgage schemes that can leave them broke or homeless, or both,” said Tobi Walker, Pew officer in Health and Human Services Policy.
Overall, about one in five people who obtained subprime mortgages in the last two years will wind up in foreclosure, according to the Center for Responsible Lending, a nonprofit advocacy group.
More than a half-million borrowers have lost their homes in the subprime market, and industry experts project that another 2 million or so are likely to meet a similar fate as the subprime crisis spirals.
With Pew's support, the Center for Responsible Lending will work to protect all subprime borrowers by urging other federal and state policy makers with jurisdiction and industry leaders to adopt basic standards.