Subprime Mortgages

Subprime mortgages refer to residential housing loans made to borrowers when the credit quality of the borrower, reflected through a weak credit history and/or a greater risk of loan default, is significantly worse than that of a typical borrower. Subprime mortgages are of considerable notoriety and interest, most notably because of their role in the U.S. 2007 subprime crisis, the ensuing 2007–2008 global financial crisis, and concerns that similar developments in low-quality mortgage lending would replicate around the world. The closest equivalents outside the United States are nonconforming mortgage loans for low-documentation, credit-, security-, deposit-, and income-impaired borrowers.

In the United States, where the term originates, Fair Isaac Corporation (FICO) scores from 300 to 850 summarize the credit risk of a potential borrower. First introduced in ...