What is a subprime mortgage?
It’s a mortgage given to a home-buyer with less than stellar credit, or who lacks the paperwork to prove an income that can support payments. While such mortgages may not seem like the greatest idea, lenders flush with money were making loans in the U.S. to almost anyone who asked and charging a little more in interest for riskier loans. The bet was that rising U.S. house prices would paper over any mistakes. But when U.S. housing prices started to fall, and interest rates began to rise, many borrowers ended up in trouble and lenders started to become insolvent (at last count about 50 have been wound down).
