Subprime lending

(redirected from Non-prime loans)

Subprime lending

Lending to individuals who have a bad credit history or relatively low income. A higher interest rate is charged for such loans because risk to the lender is higher. Excessive subprime lending is often pointed to as one of the major causes of the financial crisis of 2008-2009.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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Overall, more than 50% of non-prime loans currently being originated are five- to 10-year hybrid ARMs with LIBOR cited as the reference index for the adjustable term.
Global Banking News-19 May 2010-Santander to offer non-prime loans for customers of Chrysler(C)2010 ENPublishing - http://www.enpublishing.co.uk
Most of the non-prime loans were packaged into bonds that received triple-A ratings from the rating agencies.
So it wasn't just that you had non-prime loans. It's that in many cases you had a series of bad loans.
Citadel is a residential mortgage loan origination and servicing company focused on non-prime loans. The company's headquarters and an additional 10,000 square foot servicing center are located in Irvine and Lake Forest, CA, respectively, with three additional offices in the U.S.
"Since May of this year, [for example], we've seen approximately $15 billion in single-family mortgages that have been sold to us with FICO[R] [scores] less than 660, which was the cut-off that was used by the interagency guidance to describe those as effectively non-prime loans," Mullings says.
The Center for Responsible Lending's report, Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages, reviews 177,000 non-prime loans. The report, which is backed by the National Association for the Advancement of Colored People (NAACP), Baltimore, showed that African-American homebuyers received higher-priced loans more than three times as often as non-Hispanic white borrowers.
This reflects the roughly 50/50 split between prime and non-prime loans in the transactions.

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