The Subprime Meltdown: A Primer*

Originally published 21 June 2007

Part 1 of the NERA Insights: Subprime Lending Series

The subprime mortgage market consists of loans to borrowers with high credit risk, and the mechanisms that have evolved to originate, service, and finance those loans. While this market has existed since the early 1980s, it was not until the mid-1990s that the growth of the subprime industry gained significant momentum. A decade ago, five percent of mortgage loan originations were subprime; by 2005 the figure had jumped to approximately 20 percent.¹ Currently, there are about $1.3 trillion in subprime loans outstanding,² with over $600 billion in