Bankers and regulators are raising alarms about the growing wave of home loans that have been subprime.
They warn that the next wave is coming.
The Federal Reserve Bank of New York recently issued a new warning about subprime mortgages, warning that borrowers are increasingly turning to subprime lenders for a new source of income.
But the warning is not enough to slow the rapid growth in subprime loans, which are being marketed to low-income borrowers.
“We’ve seen a big jump in submarket loans from banks and other financial institutions,” said Daniel N. Pomerantz, chief economist for the Consumer Federation of America.
“I think the Federal Reserve should be watching the trend and really pushing for more regulation and tighter controls, but I don’t think it has any ability to do much to stop it.”
Many of the new subprime lending is being made in sub-prime locations.
The New York Fed estimates that as many as $2.5 trillion worth of sub-grade loans are being made each year, with many of them made in high-cost markets like Los Angeles and New York.
“The problem is that the subprime loan market is now so large, so concentrated, that it’s becoming an extremely lucrative, highly profitable industry,” said Peter Siegel, a senior vice president at the Center for Responsible Lending, a Washington-based advocacy group.
He noted that more than 90 percent of all subprime-lending mortgages are originated in the first two months of this year, and that there are already signs of subproprietary lending on the rise.
Subprime lending has been growing at a rate of nearly 6 percent a year for nearly two decades, according to the New York Federal Reserve.
The rate is expected to grow by about 10 percent a month, according the Fed.
The most recent data available shows that at least 7.5 million subprime borrowers have applied for the new loans, up from 5.6 million in the previous two years.
The number of subpennies increased from 644,000 in 2013 to 686,000 last year, according a report from the Center on Fairness and Equity.
The Fed has been monitoring the subproposals, which include loan modifications to lower the principal amount and provide an alternative repayment plan.
But they are being used as a “cheap” way to make new loans to the same people, said Matthew B. Biederman, the acting chief economist of the New America Foundation, a nonpartisan think tank.
He said that the average loan modification is about $300,000.
“This is a new type of subpricing, where the original loan is a mortgage, and the modifications are essentially refinancing a lower-quality mortgage into a more expensive one,” Bieder said.
In the past, some borrowers have had trouble getting loan modifications.
They have had to pay a lower loan amount or take out a loan modification themselves, he said.
The new subprices have been used to fill a hole in the market for subprime credit, where many of the mortgages are not being made on an even playing field.
The average loan modified per borrower was $1,500 last year.
But some subprime investors have made $1.6 trillion in loans, according in a report by Credit Suisse.
Many subprime buyers have used subprime modifications to buy houses in their hometowns, with some even using the loans to move their families to a new city.
That has made subprime borrowing even more attractive to investors, who can now borrow at lower interest rates, with fewer restrictions, and with much less oversight.
The subprime market has been a major contributor to the slow growth of the American economy.
The economy is still growing at the fastest pace since the Great Depression, according with the Congressional Budget Office.
But its job growth has been in decline, with the economy shrinking by a total of 2.2 percent in 2016.
The economic recovery has been slower than the jobs recovery, and it has taken longer for the unemployment rate to fall to 6.9 percent, from 7.8 percent in 2015.
The latest data show that nearly 60 percent of Americans are still living in poverty, and more than half of all people who are not in the labor force have a college degree.
About 30 million people are unemployed, according Census Bureau data.
And many people who would like to get a job do not have the means to do so.
“They have a lot of leverage, but they have to take on more debt,” said Jonathan Blatt, a research fellow at the Roosevelt Institute, a liberal think tank in Washington.
“People can’t get jobs without their credit.”
He said a recent study by the Pew Research Center found that one in four Americans lives paycheck to paycheck.
About half of the people surveyed said they had been forced to borrow to make ends meet.
In some cases, that borrowing is done through a subprime lender