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Subprime Mortgage Lenders are ones which will lend to people who are refused by standard loan criteria. The typical reason for a borrower being refused by standard criteria is poor credit rating (which applies to about 25% of the population of America), but can also be about other factors such as different types of loan structuring.

Most of these lenders were in some way affiliated to the big loan companies and all but a few have ceased to exist recently. They were not making it known that they were sub-prime, but would allow borrowing by people who were refused by standard loan agreements, and because of this could charge higher interest or fees or both. Other types of loans can also be sub-prime, including credit cards and auto loans.

The investors who provided the money for these sub-prime loans were usually not informed of the unusually great risk of their investment. One example of this is the third quarter of 2007 where only 6.8% of the mortgages outstanding in America were sub-prime yet these added up to 43% of the foreclosures. This deliberate hiding of real risk levels was one of the factors behind the economic difficulties which started in 2008.

Typical borrower profiles which might exclude them from prime mortgages are such things as two or more late payments in the last 12 months, non-payment of a loan sometime in the past, bankruptcy in the last 5 years, poor credit score or merely insufficient credit history data.

It is common for large retail businesses to sell a lot of their goods to customers who use sub-prime credit in one way or another.

Some businesses were found to deliberately lend in a way that the loan structure made it very likely that the borrower would not be able to pay back the loan. This approach resulted in nave borrowers taking out loans and then not being able to repay them.

Subprime mortgage lenders are now far less common but mortgage brokers are still sometimes able to find them for clients.

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