Subprime mortgage

Subprime mortgage

Subprime refers to higher the risk. These are mortgages that are issued to individuals who are often not qualified. That is, the long term monthly mortgage payment is more than their income. Often, these mortgages are issued on the expectation that the homeowners income will rise in the future. These mortgages are often made feasible by teaser rates. This means that the rate might be very low for the first few years but then rise steeply. In periods of weakness in the housing market or the economy in general, these mortgages are the first to run into trouble.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Subprime Mortgage

A mortgage with an interest rate higher than most other mortgages. Subprime mortgages are provided to borrowers who do not qualify for ordinary loans because of bad credit history or some other reason. There is a higher risk of default on subprime loans. Their prevalence was a significant factor in the 2008 credit crunch.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
By 2006, S&P was well aware that the subprime mortgage market was collapsing, the government said, even though S&P didn't issue a mass downgrade of subprime-backed securities until 2007.
NEW YORK: Citigroup agreed on Wednesday to pay $590 million to settle a class-action lawsuit brought by investors alleging that the New York bank failed to disclose its exposure to toxic subprime mortgage debt.
At the peak of the recent housing boom, subprime mortgage companies were loaning $600 billion per year to homebuyers with poor credit histories.
Dr Rae likened the ConDems' policy of NHS privatisation to the subprime mortgage disaster.
While Goldman wasn't alone in the offshore deal making, it was the only big Wall Street investment bank to exit the subprime mortgage market safely, and it played a pivotal role, hedging its bets earlier and with more parties than any of its rivals did.
"Comparing the Prime and Subprime Mortgage Markets." Chicago Fed Letter, Federal Reserve Bank of Chicago, Number 241.
The myth that subprime loans went only to those with bad credit arises from overlooking the complexity of the subprime mortgage market and the fact that subprime mortgages are defined in a number of ways--not just by the credit quality of borrowers.
current subprime mortgage and credit crisis would have been avoided, or