ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 13, Problem 4.10P
To determine
Subprime mortgages and their role in financial crisis of 2008.
Concept Introduction:
A subprime mortgage is a type of loan granted to individuals with poor credit scores (640 or less, and often below 600), who, as a result of their deficient credit histories, would not be able to qualify for conventional mortgages. Because subprime borrowers present a higher risk forlenders, subprime mortgages usually charge interest rates above the prime lending rate. The main types of subprime mortgages include fixed-rate mortgage with 40- to 50-year terms, interest only mortgage and adjustable rate mortgages.
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