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Is subprime heating up again?

By Judy Martel ·
Tuesday, March 19, 2013
Posted: 11 am ET

Call it a wolf in sheep's clothing. Some housing rights advocates are pushing a revival of subprime loans and renaming them "dignity mortgages".

Dig this: Subprime led the mortgage meltdown

Subprime lending was at the heart of the housing crisis that led to the recession. Borrowers who obtained mortgages based on loose credit standards eventually lost their homes to foreclosure, leaving lenders and investors holding the bag.

During the housing bubble, lenders approved subprime mortgages for borrowers with low credit scores. To compensate, borrowers paid higher interest rates. Investors who bought the mortgage-backed securities were compensated by the repayment risk with higher yields.

No one seems to feel indignant over 'dignity mortgages'

Housing activists are promoting the dignity mortgages to bank regulators, according to Investor's Business Daily. The goal is to provide mortgages for those who have rebuilt their finances since losing their home but still have bad credit.

Investors are getting back in the game again, too. The subprime market for mortgage-backed securities has been heating up, CNBC reports, as investors search for yield. Some analysts fear this is leading to another credit-led boom that will end in much the same bear market and economic slump we saw beginning in 2008.

Keep up with your wealth and mortgages, and follow me on Twitter @JudyMartel.

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