In the subprime market, higher-risk borrowers pay higher prices. Subprime lending has grown rapidly, from less than 5 percent of all mortgage lending in 1994 to an estimated 20 percent in 2005, or over $ billion. The wider range of loan pricing available in the subprime market helped to expand consumers’ homeownership opportunities and to increase their access to home equity.
But this same price variability has raised concerns about unequal treatment of borrowers. It also has raised concerns about whether certain loan terms and lending practices are appropriate, whether consumers have the ability and knowledge to shop for the most beneficial loan terms, and whether the subprime market is sufficiently competitive.