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Subprime
Explosion
Explosion
As home values rose and home ownership increased, some Americans were left out. But not for long. Before the boom, they didn’t make enough money or their credit score wasn’t high enough to get a mortgage. They didn’t qualify. Lenders wouldn’t loan these potential borrowers money because their risk of defaulting was too high, by most standards. When those standards started to change, an industry near extinction was reborn.
Strict Loan Standards Leave Some Buyers On Sidelines
For years, borrowers needed the Three C’s in order to get a mortgage: Credit, Collateral, and Character. It was accepted practice in the mortgage industry. Customers would have to document their income, their debts, and their credit history. Mortgage underwriters conducted exhaustive research on potential borrowers’ finances.
» Three C’s Required For Mortgage Loan
» Explanation And Impact Of Stated "Income Loans"
» Three C’s Required For Mortgage Loan
» Explanation And Impact Of Stated "Income Loans"
Lenders Relax Borrowing Requirements
In a quest to cash-in on the housing boom, many banks and non-bank lenders relaxed their long-standing rules. They lowered the standards borrowers needed to meet. They targeted potential customers who previously were unable to get mortgages.
» Easing The Rules For Mortgage Approval
» Lenders Compromise For Subprime Loans
» More Banks Jump On Subprime Bandwagon
» Easing The Rules For Mortgage Approval
» Lenders Compromise For Subprime Loans
» More Banks Jump On Subprime Bandwagon
Alternative Mortgages Open New Doors
These lenders created new types of mortgages that allowed borrowers with less-than-perfect credit to get mortgages. Using creatively-named loans such as Option ARMs and Hybrid ARMs, and hard-to-understand terms such as “piggyback” and “pay option negative amortization”, they triggered a subprime tsunami that would nearly drown the U.S. economy.
» Lenders Offer Loans Without Usual Collateral
» Fixed Rate Mortgages Sink As ARMs Soar
» Despite Low Fixed Rates, Borrowers Go For Adjustable Loans
» Defaults And Foreclosures Hit Minority Homeowners Hard
» Lenders Offer Loans Without Usual Collateral
» Fixed Rate Mortgages Sink As ARMs Soar
» Despite Low Fixed Rates, Borrowers Go For Adjustable Loans
» Defaults And Foreclosures Hit Minority Homeowners Hard
One State Leads The Subprime Trend
California became ground-zero for the subprime mortgage industry. The sheer size of the state, along with the demographics of its population, and lack of regulation of the mortgage-related businesses made it prime territory for subprime predators.
» Stockton, California Is Foreclosure Capital Of America
» California Mortgage Mayhem Comes To An End
» Subprime Lender Folds As Sector Comes Under Pressure
» Minority Borrowers Face Greatest Threat In California Mortgage Crisis
» A California Woman Falls Victim To A Predatory Mortgage Lender
» Stockton, California Is Foreclosure Capital Of America
» California Mortgage Mayhem Comes To An End
» Subprime Lender Folds As Sector Comes Under Pressure
» Minority Borrowers Face Greatest Threat In California Mortgage Crisis
» A California Woman Falls Victim To A Predatory Mortgage Lender
Rags To Riches: Subprime Hits Big Screen
By 2003, the biggest subprime lenders had set-up shop in the Southern California city of Irvine. Quick Loan Funding quickly became an active part of the industry. It’s founder, Daniel Sadek, is a Lebanese immigrant with a third-grade education. At the height of his subprime success, Sadek’s company was financing $200 million worth of mortgages a month, while Sadek was pocketing about $5 million a month in salary. He used some of that cash to finance a Hollywood film. The movie went bust, and eventually Sadek’s business did too.
» Sadek Accused Of Overcharging Borrowers To Pay Debts
» Quick Loan Founder's Debt Grows To $2.3 Million
» Sadek’s Lending Companies Denied Licenses
» How Subprime Fueled The Growth Of Quick Loan Funding
» Sadek Accused Of Overcharging Borrowers To Pay Debts
» Quick Loan Founder's Debt Grows To $2.3 Million
» Sadek’s Lending Companies Denied Licenses
» How Subprime Fueled The Growth Of Quick Loan Funding
Rebirth Of Subprime
CNBC anchors and reporters discuss how subprime loans developed, why these loans should have been regulated more closely and how they ultimately fell apart.
