For the average consumer who is contemplating buying a house or refinancing an existing home loan, the credit marketplace appears to be highly competitive. Mortgage loan rates are published weekly in most newspapers, making comparison shopping easy. Home loans are available through a wide variety of sources, including banks, credit unions, savings and loan associations, mortgage brokers, financed companies and specialized mortgage lenders. It is a different story for consumers with low or irregular incomes, with blemished credit records, or with limited education or financial sophistication.
Home loans are readily available in the subprime market but borrowers pay much more.
In addition to paying more, the subprime borrower may be subject to predatory practices, such as flipping, packing, and equity stripping. The stakes are especially high in these loans because the borrower's home is at risk if he cannot maintain the monthly payments. Most consumers who contact a mortgage broker expect the broker to arrange a loan with the best terms and at the lowest possible rate. Most mortgage brokers do just that, and charge a reasonable fee for their services. However, in the subprime market, there are mortgage brokers who do just the opposite.