U.S. lending practices, spurred by short-term gain, had banks lending to sub-prime borrowers with no money down.
Among so-called near-prime borrowers with credit scores of 620 to 749, the approval rate jumped to 83% from 70%.
Prime borrowers and mortgage refinancers pay rates as low as 4%, after tax.
It had warned earlier in the year that it was struggling as thousands of its sub-prime borrowers battled with debt.
Not surprisingly, given their weaker credit histories and financial conditions, subprime borrowers default on their loans more frequently than prime borrowers.
In the VantageScore credit rating scale, consumers with a score lower than 700 on a scale of 501-990 are considered non-prime borrowers.
"That is about 2% of the mortgage market and they would have been taken mainly by buy-to-let borrowers and sub-prime borrowers, " he said.
In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.
The percentage of auto-loan applications by prime borrowers that were approved rose to 91% in December from 82% a year earlier, said CNW Research.
The reason that many sub-prime borrowers do not demand prime loans or shop around for the best sub-prime price is a lack of basic financial knowledge.
ECONOMIST: Lawmakers, state and federal, are mounting an attack
From 2010 to 2011 there was a 4.7 percentage point increase in retail card originations to sub-prime borrowers, making up 31% of 2011 retail credit card originations, Equifax says.
FORBES: Subprime Lending Is Back, And That's Not Such A Bad Thing
In the long run, the solution to predatory lending is education, and for mainstream banks to see that many low-income and minority customers can be profitable as prime borrowers.
ECONOMIST: Lawmakers, state and federal, are mounting an attack
Meanwhile, the U.S. treasury secretary, along with five banks and Countrywide Financial, unveiled a second, slightly broader mortgage rescue plan Tuesday, this one extending to even prime borrowers who have fallen behind on their payments.
If sub-prime borrowers could be helped to make better decisions, says James Carr, head of research at the Fannie Mae Foundation, sub-prime lenders would have to bring rates down, and many would get prime loans.
ECONOMIST: Lawmakers, state and federal, are mounting an attack
John Bella, managing director in ABS at Fitch Ratings, said net losses on auto asset-backed securities have fallen steadily since the crisis four years ago, and the deals are now backed by stronger collateral, or loans made to so-called prime borrowers.
Historically, about half of homeowners who get a foreclosure notice are ultimately displaced from their homes, but that ratio may turn out to be higher in coming quarters because the proportion of subprime borrowers, who have weaker financial conditions than prime borrowers, is higher.
Meanwhile, the U.S. treasury secretary, along with five banks and Countrywide Financial (nyse: CFC - news - people ), unveiled a second, slightly broader mortgage rescue plan Tuesday, this one extending to even prime borrowers who have fallen behind on their payments.
"It's not just the super-prime" borrowers who are being barraged with new offers, said Anuj Shahani, director of Synovate's Competitive Tracking Services.
Regional banks have also steered clear of the other main area where credit is deteriorating, sub-prime lending (high-interest loans to borrowers with patchy credit).
ECONOMIST: Hard times have been good to America's smaller banks
The Treasury committee report said an environment of low interest rates in the early years of the millennium had spawned the growth of complex investments, as US sub-prime mortgages - those given to the riskiest borrowers - were repackaged and sold on around the world.
Moreover, lenders have tightened underwriting standards across the board for both prime and subprime mortgages, making it harder for borrowers to refinance loans.
Others allegedly were steered into costly subprime loans, even though they could have qualified for a prime mortgage, the type of loan offered to borrowers with the best credit histories.
The interest rates are attractive, usually set at 1% or 2% above the prime rate, which is the rate the best corporate borrowers can expect.
应用推荐