Homeownership is one of the primary ways that households can build wealth. In fact, in 1995, the typical household held no corporate equity (Tracy, Schneider, and Chan, 1999), implying that most households find it difficult to invest in anything but their home. Because homeownership is such a significant economic factor, a great deal of attention is paid to the mortgage market. This paper describes subprime lending in the mortgage market and how it has evolved through time. Subprime lending has introduced a substantial amount of risk-based pricing into the mortgage market by creating a myriad of prices and product choices largely determined by borrower credit history (mortgage and rental payments, foreclosures and bankruptcies, and overall credit scores) and down payment requirements. Although subprime lending still differs from prime lending in many ways, much of the growth (at least in the securitized portion of the market) has come in the least-risky (A–) segment of the market. In addition, lenders have imposed prepayment penalties to extend the duration of loans and required larger down payments to lower their credit risk exposure from high-risk loans. Borrower cost associated with subprime lending is driven primarily by two factors: credit history and down payment requirements. This contrasts with the prime market, where borrower cost is primarily driven by the down payment alone, given that minimum credit history requirements are satisfied. Because of its complicated nature, subprime lending is simultaneously viewed as having great promise and great peril. The promise of subprime lending is that it can provide the opportunity for homeownership to those who were either subject to discrimination or could not qualify for a mortgage in the past.1 In fact, subprime lending is most prevalent in neighborhoods with high concentrations of minorities and weaker economic conditions (Calem, Gillen, and Wachter, 2004, and Pennington-Cross, 2002). However, because poor credit history is associated with substantially more delinquent payments and defaulted loans, the interest rates for subprime loans are substantially higher than those for prime loans.