Subprime Borrowers Will Return to the Marketplace (Part 1)by Tim Manni
Subprime borrowers will eventually return to the marketplace as a demographic of great interest to lenders. Looking back on the trends of years past, it’s nearly impossible to predict when, but it’s certainly plausible to predict why such a statement may be true.
Looking back to the causes and effects of the surge in subprime borrowers when the refi boom dried up in 2004, it certainly stands to reason that due to current economic conditions and credit restrictions, a newly developed and under-served audience of “below prime” borrowers will emerge — and lenders will take notice.
The only audience being catered to by lenders right now is good-credit quality borrowers. Once that audience is tapped out, the natural progression will be for lenders to go out and seek an under-serviced audience out on the fringe.
The new subprime borrowers won’t be like the completely toxic subprimers of the past. The current recession has spawned many good borrowers gone bad — these were prime borrowers before the downturn — and can possibly return to a prime status once conditions recover.
Be sure to check back in with us as we’ll be exploring this issue further in the weeks ahead.