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Subprime – What Went Wrong?

March 21, 2008 by Marco Santarelli

Subprime loans were initially aimed at people with weak credit. But by 2005 and 2006, lenders encouraged many types of better-off borrowers to take such loans, including people with large incomes who chose to speculate on the real estate market.

But many subprime loans were made to refinance lower income borrowers who already owned homes, which often loaded them up with more mortgage debt than they realistically could manage and creating a risk of foreclosure.

Mortgage-Backed-Securities

Today there are very few lenders with loan products aimed at the subprime borrower, but they do exist and the lending criteria required by those lenders are far stricter than in years past.  I’m sure we’ll see the day over the next few years where many lenders announce subprime loan products, but for now we’ll have to wait for the market dust to settle and confidence to rise once again.

Filed Under: Financing

About Marco Santarelli

Marco Santarelli is an investor, author, Inc. 5000 entrepreneur, and the founder of Norada Real Estate Investments – a nationwide provider of turnkey cash-flow investment property.  His mission is to help 1 million people create wealth and passive income and put them on the path to financial freedom with real estate.  He’s also the host of the top-rated podcast – Passive Real Estate Investing.

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