Analysts, stockbrokers and homebuyers have watched the economy recently with a sharp eye as the subprime loan market has made an abrupt about-face from the easy loan days of just months ago. Homelenders are under scrutiny as a once-prevalent flow of money to borrowers has dried up. Subprime loans are loans for borrowers who don't qualify for traditional, or prime, loans. They are low or no documentation loans to people with bad credit, a poor work history, or other credit problems and have been the focus for several years of lenders who charge higher fees or offer other constraining factors while granting higher risk loans. More than one-third of all the mortgages last year in the greater Houston area were considered subprime, according to SMR Research. In the Humble-Atascocita-Kingwood area, there are subprime borrowers as well. And while these loans have been curtailed, there are still good loans available, says David Otis, owner of a net branch of American Mortgage Group. "There are still people out there offering subprime loans. They are not as aggressive as they once were but people should know that there are still options," Otis said. Otis said his staff talks to many borrowers with "challenged credit" and they are able to help most. Otis specializes in government FHA loans, which are not credit score driven. They are regulated by the U.S. government. "Probably 30 to 35 percent of the loans I made last year were subprime loans," he said. "What has actually gone away are 'liars loans,' where loans of 100 percent financing were based on credit scores only. "The important thing is to make sure your mortgage company is FHA quailified," said Otis. Many firms, like Otis', offer financial counseling regarding the home buying process. For no charge, a loan counselor will look over a homeowner hopeful's financial situation and make suggestions on what to do to make their credit picture better. "We tell customers, 'We finance your future, not your past,'" he said. Advice might be to wait six months and pay off a credit card or to have no late payments for at least a year. Since it can take months to find the perfect house, mortgage lenders act as advisors throughout the waiting period. Otis comes from a real estate background. His mother, Lynda Otis, owned Lynda Otis Properties for years. "It has been slow the first part of the year but the market is brisk. There are loans available out there if people want to work toward them," he said. Joe Stunja, one of the owners of Re/Max Associates, says subprime loans are good and bad. "They give people with a little hiccup but a stable history, a chance to own a home. On the flip side, they can be disasters if given to people who are in really bad shape." Dr. Harvey Rosen of Princeton University concurs. "The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated against, the people without a lot of money in the bank to use for a down payment," Rosen said. Statistics show that a majority of home loans to African Americans and 40 percent of home loans to Hispanics were subprime loans. Even though subprime loans have been the focus all spring of congressional hearings and are bantered by pundits daily, the great majority of subprime borrowers make the payments. Less than 15 percent are delinquent, much less in default. Summer is traditionally a good time for home buyer and Otis says people with less-than-stellar credit can still find help. "Just be sure the mortgage company is qualified to discuss all options," said Otis, "and be patient."

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