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Subprime Mortgage Lending

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Definition of 'Subprime Mortgage Lending'

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To understand the word "subprime" you first need to understand how the word "prime" is used in the context of mortgage lending. A "prime" borrower (customer) will have prime characteristics which are a high credit score and a low debt. Conversely, a borrower who has characteristics below this, i.e. "sub" this would be "subprime."

Subprime is a risk profile given to borrowers who have credit ratings that might include:
  • Limited debt history
  • No assets that could be used as security
  • Excessive current debt
  • A history of late or missed payments
  • Defaulting on debts
  • Legal judgments such as "orders to pay" or bankruptcy
Subprime lending is also called
  • near-prime lending
  • non-prime lending
  • second-chance lending

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