According toAmerican Banker, banks in general werenot making commitmentsin response to the OCC bulletin, which it attributed to "lingering skepticism about the business opportunities in the
subprime market." The Community Financial Services Association of America, an organization that represents the small-dollar lending industry, said that while it welcomed competition in the market, it thought banks would find such small loans "unprofitable and unsustainable, due to the high cost and risk of offering these products," according to an opinion piece written by Dennis Shaul, CEO of the Alexandria, Virginia, organization.
Some also claim that ratings were less accurate in the
subprime market than elsewhere.
The business has carved out a strong niche in the
subprime market for used cars, which has proven to be a successful business model.
Progress so far is attributed partly to 'vanilla' mortgage features, with fully amortising, full-documentation loans, no
subprime market, and uniform underwriting guidelines such as the nationwide Chinese loan-to-value (LTV) cap that currently limits lending to 80% of the value of a residential property.
The
subprime market for cars is beginning to sound the warning about pockets of excess for consumers as well.
When lending standards tightened after the
subprime market crashed in the middle of 2007, three types of potential borrowers could no longer obtain a mortgage loan: borrowers who would have gotten a subprime loan had the
subprime market continued to exist, borrowers with subprime mortgages who needed to refinance into loans with better terms, and borrowers who could not afford large down payments but were otherwise creditworthy.
It says S&P delayed updating its ratings models, rushed through the ratings process and was fully aware that the
subprime market was flailing even as it gave high marks to investments made of subprime mortgages.
According to Edmunds, key driver of this resurgence, according to Edmunds.com, is the revival of the
subprime market, which accounted for a quarter of all new auto loans in the second quarter of 2012, up from a second quarter low of 17.6 % in 2009.
Costa Mesa, California-based Experian announced it has provided Clearwater, Florida-based Clarity Services Inc., a provider of thin-file and underbanked consumer data reporting, with custom analytics via Exper-ian's Precise ID [sm] platform to help the company further penetrate the
subprime market with its new Clear Sub-prime ID Fraud [TM] solution.