Are risky subprime mortgages being revitalized in the US housing market? Defaults on subprime mortgages played a large role in the 2008 financial crisis, however, now ten years later they seem to be making a comeback. Who does this benefit? Potential buyers with low credit ratings, individuals who are self-employed or do not have a steady monthly income and even immigrants who have not yet built up their credit in the US. Julian Hebron, head of sales at RPM Mortgage explains that “[m]aking credit available to borrowers who are subprime is national policy and it is an important part of economic growth.”
The Financial Times reports that “[i]ssuance of securities backed by riskier US mortgages roughly doubled in the first quarter from a year earlier, as investors lapped up assets blamed for bringing the global financial system to the brink of collapse a decade ago.” Deals in the first quarter of 2018 were worth $1.3 billion, which is a significant increase from last year’s $666 million.
These nonprime mortgages are not backed by Fannie Mae, Freddie Mac or the government. However, they expand the credit available to potential buyers. The rating agency Kroll predicts the issuance of nonprime mortgages to reach up to $6 to $7 billion. Matt Nichols, the founder and chief executive of Deephaven Mortgage, expects the issuance of loans to exceed $10 billion. Dodd-Frank reforms, implemented in the aftermath of the financial crisis, have closely regulated subprime mortgages to protect the market and ensure borrowers repay their loans.
The comeback of nonprime mortgages means that lenders, real estate brokers and buyers need to become more familiar with what products are available and the regulations that impact borrowing. Dodd-Frank reforms have curtailed potential risk factors, making subprime mortgages an ideal solution for certain borrowers.
 McLannahan, Ben. (August 31, 2017) “Nonprime has a Nice Ring to it: the Return of High-Risk Mortgage.” The Financial Times. Available at: https://www.ft.com/content/3c245dee-8d0f-11e7-a352-e46f43c5825d. Accessed on March 30, 2018.
 McLannahan, Ben and Rennison, Joe. (March 29, 2018) “US Subprime Mortgage Bonds Back in Fashion.” The Financial Times. Available at: https://www.ft.com/content/6478a8d6-32c3-11e8-b5bf-23cb17fd1498. Accessed on March 30, 2018.