Subprime Lending: Beneficial For Arizona Economy; Consumer Finance Group Warns of Danger of Over-Regulation

Business Wire

January 9, 2004

PHOENIX, Jan 9, 2004 (BUSINESS WIRE) -- Subprime mortgage lending provided an estimated $1.68 billion in spending power in Arizona during 2001, according to a report released today by the Arizona Financial Services Association.

The study, Subprime Lending in Arizona: an Empirical Analysis, studied the subprime mortgage market in Arizona to examine the economic effect of subprime mortgage lending on the state, utilizing the most recent data available. The study established that the subprime lending market significantly contributes to Arizona's economy by making available loans to individuals who would not qualify for prime lending rates, and that the subprime market, both nationally and in Arizona, works as a competitive market should.

Greg Williams, Executive Director of the Arizona Financial Services Association, highlighted the economic importance of the industry and warned that over-regulation could have dire effects on an already struggling economy. "This study illustrates how economically significant the Arizona subprime lending industry is, making a valuable contribution to the recession-hit state economy while providing fair and reasonable mortgage finance for individuals who would be denied credit elsewhere."

Subprime lending is the business of providing credit to individuals with no or less-than-perfect credit histories. The report established many important facts relating to subprime lending in the state of Arizona:

-- Subprime mortgages predominantly provide credit to residents of Arizona with incomes close to or over Arizona median household income

-- Arizona subprime lending is not focused in zip codes with high concentrations of Hispanic residents or other minorities

-- Price and risk are closely correlated in both Arizona and national subprime lending markets

-- The majority of subprime borrowers in Arizona are 35 to 55 years old

The study was conducted by the Center for Statistical Research and relies on the latest available empirical information about population, racial and ethnic composition, mortgage lending and other issues from a number of databases, including US Census Bureau data and the database on home lending compiled by the federal government under the Home Mortgage Disclosure Act (HMDA).

The Arizona Financial Services Association (www.arizonafsa.org/) is a non-profit trade association representing regional and national firms that provide a broad range of financial services including home purchase and home equity loans.

SOURCE: Arizona Financial Services Association

CONTACT: Arizona Financial Services Association

Greg Williams, 505-843-7032

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