The subprime mortgage market has been getting a lot of attention lately, since many borrowers of these types of loans have been going into foreclosure.

Subprime loans became very popular during the housing boom from around 2000-2005 because they allowed people to get into homes that normally could not.

These loans refer to people who are not in the “prime” sector of the mortgage industry, meaning they do not have the credit scores or other financial factors to qualify them as a prime borrower.

Subprime borrowers get less favorable rates and terms because of the increased risk they pose to the institutions who lend them money.

But now, at a very interesting time for the mortgage industry, Wells Fargo announced its plans to purchase more subprime loans.

A December 8, 2006 article by E. Scott Reckard, of The Los Angeles Times, “Wells Fargo buying more ‘subprime’ mortgages,” discusses some of the interesting things going on with Wells Fargo.

Well Fargo will be buying more of these loans because they believe it will help sales in other parts of the bank.

“At a time of pinched profits in the mortgage industry, Wells Fargo & Co. is increasing its lending to risky borrowers — betting that they will sign up for additional services such as checking accounts and credit cards.”

“Wells Fargo this year leaped ahead of Orange-based Ameriquest Mortgage Co., Irvine-based New Century Financial Corp. and other rivals to become the biggest funder of so-called sub-prime mortgages. Such loans go to customers who can't qualify for the best terms because of imperfect credit, heavy debts or other reasons.”

Many people have been very concerned about the fact that lenders are trying to get more people into these subprime loans without fully educating the borrower on what exactly they are signing in to.

But, we must also keep in mind that it is up to the borrower to understand their loan as well. Wells Fargo has a plan to combat those who say borrowers need more mortgage education.

“In a strategy it plans to announce today, the San Francisco-based banking giant said it would automatically enroll these borrowers in a financial education program that would include free consultations in English or Spanish with specialists who can help them create financial plans and try to clean up their credit.”

“It's the most comprehensive such program ever offered to borrowers in the sub-prime market, said Stephanie Christie, a senior vice president at Wells Fargo Home Mortgage.”

The program is called Steps to Success, and is in direct response to some of the allegations about lenders being careless and not educating their borrowers.

“Company executives and analysts said it also would provide Wells an opportunity to engage in the ‘cross-selling’ characteristic of its marketing. For example, the educational program will advise that borrowers can improve their credit by paying mortgages and other bills automatically — which requires having a bank account.”