Industry NewsMortgage

Subprime real estate loan party less hearty

Boom in loans to those with poor credit slows

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As the housing market slows, the booming subprime real estate loan market – loans for people with less-than-stellar credit – is also slowing, observers say, despite a long runup. "In general, there's been a subprime boom over the last two years," said Jeffrey DerGurahian, senior vice president of capital markets at Metrocities Mortgage, "but Wall Street is getting concerned about the risks in these loans. "Right now the execution selling loans to Wall Street is not as attractive as it used to be. People are afraid of the credit risk going toward a slowing market," the senior vice president said. Subprime loans are loans to people with less than excellent credit, poor employment records or other problems that prevent them from getting traditional loans. Because the risk is greater, the interest rate charged is generally higher. As early as December 2005, one industry veteran predicted that "exotic" loans, a category that includes subprime loans, would be curtaile...