Magazine article American Banker

Pro: Prime Time for Subprime Diversification

Magazine article American Banker

Pro: Prime Time for Subprime Diversification

Article excerpt

All we seem to read and hear about in the mortgage industry these days is how subprime and nonconforming loans are taking center stage.

Almost every large, midsize or small mortgage banker seems to be rushing into the fray. Even normally conservative Freddie Mac/Fannie Mae mortgage lenders have a real zest to board the subprime bandwagon. There is a ton of untapped equity and a corresponding level of consumer debt.

Within three to five years, the market for nonconforming B and C credit borrowers will evolve into a key area of mortgage lending.

Although job growth appears strong in most regions of the United States, many people with decent jobs and better than average credit histories are taking on more debt than ever before. People are using plastic to buy everything from groceries to automobiles.

The bottom line is that many consumers will find it difficult to pay off these card balances and will tap the equity in primary and vacation homes and investment properties to do so.

Within five to seven years, the baby boomers will reach their spending peak - not only for credit card purchases, but for home furnishings and renovations, college tuition, medical expenses, weddings, vacations, and sometimes for failed business ventures. And some will wish to refinance, creating a repeat business opportunity for the mortgage banker.

But caring for a potential borrower and sensitivity to his or her plight is extremely important. A loan officer who works with B or C clients must be a good listener, sympathetic to an applicant's special problem or requirements. …

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