| Jemima and Ricardo Sanon, 30 and 29, saw the possibility of trouble before they ever signed their mortgage documents in 2004. The Sanons had diligently saved $5,000 in preparation to buy their first home, but the sum was just enough to cover the closing costs. So to finance the $290,000 purchase price of a Waltham, Mass home, they took one loan for $232,000 and also a piggyback loan for $58,000, both from New Century Financial, a subprime lender. |  |
The smaller of the two mortgages didn’t worry them. The terms were fixed for 30 years at 10.7 percent, and the monthly payment of $538 was something they felt they could handle. But the larger loan was fixed for just two years. After that, the rate would adjust every six months, which is typical for subprime borrowers. “I worried about how we would make payments when they increased,” said Jemima, a medical assistant. “The mortgage broker [at New Century] told us we could refinance.” A spokeswoman for New Century declined to comment on the specifics of the Sanon’s case citing privacy issues, but she did issue this statement: “New Century is offering special programs that are designed exclusively for current New Century borrowers who are most susceptible to payment shock at the reset of their loans.”
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