Are Some Subprime Borrowers Managing?

The mindset of many may be that anyone with a subprime loan has either failed, foreclosed, or is at least doomed to. However, recent data released by Inside B&C Lending just might change those perceptions.

According to the data, “A lack of new originations combined with record-high foreclosures” has served to reduce the number of existing subprime loans in the U.S. by nearly half. As of the end of 2006 — the last year in which subprime loans were generally written –subprime volume stood at $1.24 trillion, according to Inside B&C Lending. That dollar amount has fallen by $155 billion over the last year alone, dropping the total of outstanding subprime loans to an estimated $700 billion (as of June 30, 2009).

While that dollar amount may still seem astronomically high, it not only represents a substantial decline in volume, it reveals that not all subprime borrowers have or are necessarily destined to fail. If no new subprime loans have been written in about two years, and there is still $700 billion outstanding, at least some Americans have been able to manage their below-prime loan.

Perhaps the group which has not failed is actually the core niche group of borrowers for whom a short-term subprime loan was intended and beneficial for — those who hoped to make payments on time for a period in order to move up the credit scale.

Problems Still Persist

According to Inside B&C Lending, non-prime lenders have been less successful in the Home Affordable Modification Program than others in the industry. Many of the typical struggles that plague subprime borrowers — little to no equity, unsteady income, lower pay scale — don’t tend to bode well with lenders.