Subprime mortgages are mortgage loans granted to people with little or no credit, bad credit, or with little or no down payment. There has been a surge in the number of foreclosures, and holders of these types of loans represent the lion’s share of the people in trouble now. Property values have fallen in many if not most US markets, so even if the banks foreclose on properties, the sale of the real estate may not satisfy the amount of the loan that the bank has outstanding.
What is a subprime mortgage?
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A subprime mortgage is a mortgage granted to a borrower considered subprime, that is, a person with a less-than-perfect credit report. Subprime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.
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