The Current State of Subprime Home Equity Loans Market

Subprime home equity loans in 2010 will be very difficult to obtain. Most lenders who were engaging in subprime loans throughout the early 2000s rethought this strategy once the housing market crashed in 2007. Other lenders were reprimanded for predatory lending techniques, and they will not continue with subprime loans in the future.

History of Subprime Lending

Subprime lending was common on both mortgages and home equity loans during the financially prosperous 1990s and early 2000s. Borrowers who were not quite qualified for a loan could use this option, agreeing to very high rates in the future, to get a loan they could afford in the present. Unfortunately, this was exposed as a highly risky and often unethical practice when subprime borrowers defaulted in high rates in 2007-2009.

Future of Subprime Lending

Banks will be much less likely to extend loans to unqualified borrowers in the short-term future. Once the economy recovers and banks loosen their wallets, it is possible subprime home equity loans will return to the dialogue. However, on the whole, these loans should not be expected to return to their original prominence because they cost lenders far too much historically, even partially contributing to the failure of several large banks.

 

 

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