A subprime loan is a type of loan that usually charges a very high rate and often contains many conditions, which upon non-fulfillment carry fines. Although controversial but the subprime industry is growing much faster than the primary loan industry. Infect, it grew at a rate of more than 25% a year, from 1993 to 2004. It is not only the small companies but big names such as Ameriquest, Well Fargo and Citigroup are all capitalizing on this opportunity.
Every year thousands apply for subprime loans. Mortgage loans make up the highest share of the loans. According to a report published by USA today in May 2005, key players in the subprime loans are mainly independent mortgage companies that account for nearly 61 percent of the deals. Ameriquest, New Century and Lehman/SASCO are the three top players. Potentially a very lucrative business, a few companies including Novastar Mortgage, WMC Mortgage and Fremont investments have increased their issuance demand by a whopping 300 percent. The subprime mortgage industry has also attracted foreign banks such as Deutsche Bank and UBS Warberg, who were among the top underwriters in 2003.
All this is very good news for creditors with a bad history. But be aware! Gaining on a lucrative market, many spammers and unrepeatable companies have started TV campaigns luring the clients by falsifying information such as payment terms of their choice or the payment plans that far exceed the financial capability of the borrower. Recent crackdown of FBI on subprime lenders has further escalated the controversial debate of issuing such loans to the borrowers.
However problematic such issues might be, one thing is for sure. The subprime loan market is here to stay. A new initiative by US Department of Housing & Urban Development (HUD) further substantiated the need for such mortgage loans, as people with very little credit history are now able also avail this opportunity.
Written by Herald Gumpsten. Get all you need to know about and even
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