Enough time has now passed since the subprime meltdown of the 2008 timeframe. Lenders are predictable in their ability to forget and be cyclical.
When times are feeling good, they expand lending into riskier areas. It happens every single time.
Well, the subprime mortgage market is making a comeback again. For people with credit scores as low as the 500, lenders are getting ready to let easy money flow again.
However since the phrase “subprime mortgage” still has a nasty taste, these new low credit score loans are being called “non-prime mortgages” or loans for people with “less than perfect credit.”
CNBC is reporting at least one lender “will allow its borrowers to have FICO credit scores as low as 500. The current average for agency-backed mortgages is in the mid-700s. Borrowers can take out loans of up to $1.5 million on single-family homes, townhomes and condominiums. They can also do cash-out refinances, where borrowers tap extra equity in their homes, up to $500,000. Recent credit events, like a foreclosure, bankruptcy or a history of late payments are acceptable.”
Carrington Mortgage Services says these non-prime loans are “an ideal solution for consumers with lower credit scores, high debt-to-income ratios, who are self-employed or who have had a recent credit event – such as foreclosure, bankruptcy, short sale, missed credit card or late mortgage payments – and may not be eligible for conventional or government loan products.” Carrington is also willing to allow borrowers to use bank statements to verify income in place of IRS tax documents for self-employed borrowers. – Non-Prime Loans_new
A lot of people who want a mortgage but maybe are not ready to handle a mortgage may get swept up in this new availability of non-prime mortgages. I’m sure the prevailing attitude will be we need to let the good times roll.