Sub-Prime Loans Making A Comeback

July 2, 2018



The Great Recession of 2008 was the largest financial disaster in over 100 years in our nation. One of the biggest culprits causing the crisis was the existence of subprime mortgages.


Sub-prime mortgages were home loans given to borrowers who had bad credit and put very little or no money down when acquiring the loans. These home loans were given out like candy to whoever wanted one. The subprime practice ended during the housing crash that helped cause hundreds of thousands of foreclosures. These sub-prime loans were given to borrowers who did not have the income to make the monthly payment.


After the crisis, new regulations were put into place to help keep another crash from happening again. Now, ten years beyond the start of the crisis, these subprime loans are making a comeback under the guise of being called “non-prime” loans. Moreover, bad or poor credit borrowers are the targets of these ‘new’ non-prime loans.


Carrington Mortgage Services, based in California just announced they are offering loans to people who have “less than perfect credit”. The company will originate and service the loans.  Carrington will also securitize the loans for sale to investors.


Executive vice president of Carrington Mortgage Holdings, Rick Sharga said, “We believe there is actually a market today in the secondary market for people who want to buy non-prime loans that have been properly underwritten. We’re not going back to the bad old days of ninja lending, when people with no jobs, no income and no assets were getting loans.” He said that Carrington will manually underwrite each loan, assessing the individual risks.


Carrington is also allowing borrowers to take out loans with credit scores as low as 500. Borrowers who have credit scores in the mid-700s will be able to take out loans up to $1.5 million on single-family homes, condominiums and townhomes. They can also tap the extra equity they have in their home to qualify for cash-out refinances - up to $500,000. Past foreclosures, bankruptcies and even a history of late payments will be considered acceptable.


Last summer Fannie Mae relaxed their lending standards for prime loans by allowing borrowers with lower credit scores and a higher debt-to-income ratio obtain loans without large down payments. Others who are now jumping into the non-prime game are Caliber and Angel Oak.


Presently, one-fifth of our population have very low credit scores and are unable to secure loans. The economy is growing, rents are rising causing more Americans wanting to become homeowners. Financial institutions and investors don’t want to miss this opportunity to sell these non-prime loans to such a large portion of our population.


If you have questions regarding the best loan for your property, contact Gantenbein Law Firm's top real estate attorneys at 303-618-2122. Gantenbein Law Firm is located in Denver, Colorado. For more information, visit


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