Subprime lending ? higher-interest loans to consumers with impaired or non-existent credit histories ? has been the fastest-growing part of the mortgage industry.
Subprime mortgage activity grew an average 25% a year from 1994 to 2003, outpacing the rate of growth for prime mortgages. The industry accounted for about $330 billion, or 9%, of U.S. mortgages in 2003, up from $35 billion a decade earlier.
The growth has attracted accolades and controversy. Federal Reserve Governor Edward Gramlich has said subprime lenders helped push homeownership to record levels, making it possible for a growing number of minorities to buy homes. But he also raises questions about high delinquency rates.
And dozens of states have passed laws since 1999 to crack down on predatory lending ? loans with high fees, excessive interest or other unaffordable provisions ? clustered in the subprime sector.
Still, there’s no doubt subprime lending is now a Main Street, mainstream business with sophisticated marketing that promises to deliver the American dream of homeownership, or lower the monthly burden of all-too-American consumer debt.
For this complete story, please visit Subprime Loan Market Grows Despite Troubles.
