Lenders Getting Back in Subprime Mortgage Market - 8 News NOW

Lenders Getting Back in Subprime Mortgage Market

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LAS VEGAS -- Wells Fargo Bank, the largest mortgage lender in the country, is getting back into the subprime home loan business again.

Homebuyers can now get a home loan with a lower credit score. These expensive loans for borrowers with poor credit history are partly responsible for the housing market meltdown.

8 News NOW has learned other lenders in Nevada are also edging back into subprime market. The housing crisis taught us a lot of lessons.

Reforms have been made, and new laws are in place. People who don't have the best credit history will still need a roof to live under, but this time, it will be different.

The subprime mortgage crisis hit Nevada with a vengeance.

Michele Johnson with the Financial Guidance Center helps people with their housing headaches that began years ago.

"We see folks who are still trying to deal with it," Johnson said, "We sort of created this frenzy. Everybody thought they need a home. Prices were appreciating dramatically. And people had the attitude, 'if I don't do it today, I won't ever be able to do it.'"

People jumped into homes that were overpriced and unaffordable. The housing bubble exploded.

Now, the financial industry is buzzing about Wells Fargo re-entering the subprime market. The banking giant will sign off on government-backed home loans, if a homebuyer has a credit score of at least 600, which is a drop of 40 points.

"Wells Fargo is not the only bank that has started to step back in the subprime mortgage market. It seems to be a statewide phenomenon." data analyst with the UNLV Lied Institute for Real Estate Studies Luis Lopez said.

Lopez says Nevada had roughly 100,000 subprime mortgages serviced in 2007-2008 but the state is at about half of that number right now.

Lenders have learned a lot of lessons in the years since the housing crisis and Great Recession.

"They are no longer allowing people to just state their income. They're actually requiring them to show proof of income." Lopez said.

A host of other safeguards are now in place.

"The subprime, or high-cost loan, it is a requirement of the federal government that the consumer receive counseling from an unbiased third party," Johnson said.

The Financial Guidance Center is one of those approved parties, informing borrowers about the risks they may get themselves into for what is supposed to be home sweet home.

The center advises consumers considering a subprime mortgage to look at their situation and see if it's better to work for the next few months to restore their credit, and then get a qualified mortgage.

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