SUBPRIME MORTGAGES
There are varying opinions regarding the size of the sub-prime mortgage market. Depending on who you speak to, it accounts for 30 percent of all mortgage loans, 20 percent or 15 percent.

Evaluation the size of the subprime market is complicated for a variety of reasons. For instance, it's often difficult to differentiate between a subprime mortgage and an Alt-A loan -- a type of mortgage class that falls between prime and subprime. In addition, there are two ways to count them: by the total dollar value or by the number of loans. Then there's the issue of whether you are talking about all outstanding mortgage or all loans originated in a certain year.

Moodys.com, a leading online financial source, says subprime originations totaled $520 billion in 2006. The American Bankers Association says all originations totaled $2.75 trillion. If both data sources are correct, that means over 25% of mortgage volume consisted of bad credit loans last year.

Remember, that dollar volume, not the total number of mortgage loans. Subprime mortgage balances are typically smaller than average, so more than 25 percent of borrowers received subprime financing.

These stats rely on lenders to classify what they mean by subprime. There are thousands of lenders, all of which have different definitions. As a rule of thumb, a bad credit mortgage is a home loan to an individual with a credit score below 600. However, there are lenders that categorize loans as subprime even if the borrowers encompass credit scores of 640 or higher, if the borrower makes a down payment of five percent or less or does not document their income or assets. These types of loans may be classified by Alt-A by other lenders.

There really is not a solid definition of subprime that everyone agrees on. That's mainly what makes it hard to assess the size of the subprime market.

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