Subprime Mortgage Lenders And How They Can Help You.
Subprime Mortgage Lenders are ones which will lend to people who are refused by standard loan criteria. The typical reason for a borrower being refused by standard criteria is poor credit rating (which applies to about 25% of the population of America), but can also be about other factors such as different types of loan structuring.
Most of these lenders were in some way affiliated to the big loan companies and all but a few have ceased to exist recently. They were not making it known that they were sub-prime, but would allow borrowing by people who were refused by standard loan agreements, and because of this could charge higher interest or fees or both. Other types of loans can also be sub-prime, including credit cards and auto loans.
Investors were often not well informed that the investments they were putting funds into were really sub-prime and thus were a lot more risky than usual. One example is the third quarter of 2007 where sub-prime home loans accounted for 43% of the foreclosures started while only being 6.8% of the number of outstanding home loans. The fact that the real risks to investors were so hidden is one of the significant factors in the economic problems of 2008.
Typical borrower profiles which might exclude them from prime mortgages are such things as two or more late payments in the last 12 months, non-payment of a loan sometime in the past, bankruptcy in the last 5 years, poor credit score or merely insufficient credit history data.
It is common for large retail businesses to sell a lot of their goods to customers who use sub-prime credit in one way or another.
Some businesses were found to deliberately lend in a way that the loan structure made it very likely that the borrower would not be able to pay back the loan. This approach resulted in nave borrowers taking out loans and then not being able to repay them.
Subprime mortgage lenders are currently rare but they can still be found if one really wants to look.
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