Subprime Mortgage Lending
Definition of 'Subprime Mortgage Lending'
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
- near-prime lending
- non-prime lending
- second-chance lending
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