The New York Times writes about the reemergence of subprime loans. The article notes that, despite the notoriety that subprime loans gained as a prime cause of the financial crisis, they are re-emerging, under much more careful control, as one answer to the tight lending standards that have shut out millions of would-be homeowners.
“We call it the sane subprime,” said Brian O’Shaughnessy, chief executive of the Athas Capital Group, which gave the Arroyos their loan.
Subprime loans, which accounted for about 15 percent of all new home loans in 2005 and 2006, are now a tiny sliver of the mortgage market. Only a handful of lenders are offering them, at interest rates from 8 to 13 percent (compared with about 4 percent for conventional loans to highly rated borrowers).