• Subprime is a type of loan for borrowers with low credit ratings
    • Interest rates are higher because borrowers carry risk
    • Usually given to those with a rating below 620
    • Several types of subprime mortgage structures
    • Most common is the Adjustable Rate Mortgage or ARM
    • ARM offers a fixed interest rate
    • Lenders freely granted these loans from 2004 to 2006 when lenders received profits and could charge above primeInvestopedia: What is a Subprime Mortgage?
    • In 2008, the rate of home foreclosures skyrocketed and many lenders faced financial difficulty and bankruptcy

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