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Subprime Mortgages' Modest Comeback

Loans are available for home buyers with bad credit—but are hard to get

Bill Dallas ran two subprime lenders that collapsed during the financial crisis. Now he’s back in business and plans to start offering what he calls nonprime loans later this year through his latest venture, NewLeaf Lending, based in Calabasas, Calif. “There needs to be a solution for people who don’t fit in the box, and rebuilding nonprime lending is it,” says Dallas. This time, he says, tougher lending rules will require borrowers to put down as much as 30 percent and document their income, credit, and work history.

Lenders are returning to the subprime market, although so far the lending is a fraction of what it was before the mortgage crisis. About $3 billion of subprime mortgages were made in the first nine months of 2013, matching the year-earlier period, according to Inside Mortgage Finance, a trade publication. In 2005, subprime originations reached $625 billion.