Saturday, May 30, 2015



What are subprime - Subprime loans refers to lending to subprime borrowers, a practice that is commonly "non-compliant" as a loan "B/C" or. Loans to subprime borrowers are municipalities, which may have served by other lenders in the past. In recent years, the segment of mortgage loans rose dramatically, with more than 90% of all subprime mortgages in or after 1993 made the end of 1996, the total value of outstanding mortgages exceeding $ 350 billion million risk. Only in 1997, subprime lenders more than $ 125 billion in home equity loans. Subprime loans are an important and growing part of the market of home equity. Assemblies of high risk accounts for 11.5% of total mortgage lending market in 1996; for the first half of 1997, which made 15.5% of the market. At the same time the composition of the companies involved in the market for subprime is developed. A dramatic change in this market is the growth in the segment of mortgage lending by the major companies nationwide.

The market for subprime mortgages has prospered because it profitable loans, the borrower is the demand and opportunities to grow increases on the secondary market. Lenders usually cost subprime loans to consumers in interest rates and higher fees than traditional loans. Prices and highest points appropriate where the greatest credit risks are involved, as is the case of subprime loans. Critics, however, say that interest and fees are charged by some subprime lenders exaggerated, and is much higher than necessary to meet the increased risks, especially because these loans secured by the value of a house. Some attribute the high rates of first mortgage lenders under federal deregulation of certain limits on US interest rates in the year 1980th

The relatively high margins in the area of ​​subprime mortgages fueled demand on the secondary market for investors who are high performance securitized assets, especially in an environment of generally lower interest rates. In 1996, the sector of subprime mortgages has more than 38 million shares, the biggest increase in industry-wide securitization of loans will be published this year. The development of the secondary market, which in turn has helped the growth of the industry, by supporting it lenders to raise funds on the open market to expand subprime market. Freddie Mac, one of the main administration involved in the purchase of mortgage-funded company, has recently its intention to the secondary market for subprime loans enter by buying a significant number of subprime "Unless announced" loans in 1998 and higher "B and C" 1999th

The market for subprime mortgages are expected to continue growing. Credit card defaults rise and personal bankruptcies are at record levels, which negatively affects the creditworthiness of borrowers, pushing more consumers to higher risk categories. Meanwhile, consumer spending remains strong. Together, these factors increase the market for subprime loans. Furthermore, looking more borrowers generally home equity loans because of the change in the tax code restricting interest deductions that. For people with a first mortgage.

Tagged: ,

0 comments:

Post a Comment