Subprime Mortgage

A mortgage taken out by subprime borrowers, or those with a low credit rating. Lenders usually charge a higher interest rate than for creditworthy borrowers as they see a greater than average chance of default. Subprime borrowers include those with a history of loan delinquency or default, those who have been declared bankrupt or those with limited debt experience. Subprime mortgages issued by U.S. lenders played a major role in the credit crisis that began in 2007. Many such mortgages were sold to investors as mortgage backed securities (MBS) and asset backed securities (ABS). Falling U.S house prices led to a decline in repayments and an increase in mortgage defaults and foreclosures, severely undermining the value of the securities backed by them.