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Are subprime mortgages coming back?

Lenders missing opportunity to make more money

It’s time to return to the days of subprime lending, at least that's what an article in the New York Times suggests.

But not the type of subprime lending negatively associated with the financial crisis.

Rather, lenders could make money by offering the type of subprime lending popular at the turn of the century:

Laurie S. Goodman, an expert in housing finance at the Urban Institute, a think tank in Washington, D.C., recently calculated that lenders would have made an additional 1.2 million loans in 2012 had they merely loosened standards to the prevailing level in 2001, well before the industry completely lost its sense of caution. As a result, fewer young people are now buying first homes, fewer older people are moving up and less money is changing hands. 

Before things got out of hand during the last decade, subprime lending offered opportunity for many people, including minorities and immigrants, whose economic lives did not conform to the mortgage industry’s traditional expectations.

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