The banking system may not be ready to return to the world of subprime lending, but the time may come for the banks to ease credit standards to afford more people the access to homeownership with a risk based pricing and provisions set in the loan. In the 2008 crisis, these loans were a no win situation for the borrower and eventually the bank. A few tweaks should be considered to make subprime lending a tool for people to rebuild credit and obtain homeownership. The 2008 Subprime loans were never a winning scenario for the client with imperfect credit. The banks can use Subprime lending with a much different scenario than in 2008. The first scenario would be affordability of the borrower on the residential property. Second, the pricing matrix to price in risk for the bank but not price out the borrower. Third, a rewards program would benefit borrowers in rate reductions for making monthly payments on time. This would benefit the banks in providing a second chance to be leaders of … [Read more...]
