GC: n
S: Investop – https://www.investopedia.com/terms/s/subprime_mortgage.asp (last access: 26 November 2024); CFPB – https://www.consumerfinance.gov/ask-cfpb/what-is-a-subprime-mortgage-en-110/ (last access: 26 November 2024).
N: 1. – subprime (adj): also sub-prime, in reference to loans with more onerous conditions, offered to borrowers with poor credit history, by 1978, in frequent use from 1996, from sub- “below” + prime (adj.) “of the first quality.”
– mortgage (n): late 14c., morgage, “a conveyance of property on condition as security for a loan or agreement,” from Old French morgage (13c.), mort gaige, literally “dead pledge” (replaced in modern French by hypothèque), from mort “dead” (see mortal (adj.)) + gage “pledge” (see wage (n.)).
So called because the deal dies either when the debt is paid or when payment fails. Old French mort is from Vulgar Latin *mortus “dead,” from Latin mortuus, past participle of mori “to die” (from PIE root *mer- “to rub away, harm,” also “to die” and forming words referring to death and to beings subject to death). The -t- was restored in Modern English based on Latin.
And it seemeth, that the cause why it is called mortgage is, for that it is doubtful whether the feoffor will pay at the day limited such sum or not: and if he doth not pay, then the land which is put in pledge upon condition for the payment of the money, is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the tenant, &c. [Coke upon Littleton, 1664]
2. subprime mortgage, a type of home loan extended to individuals with poor, incomplete, or nonexistent credit histories. Because the borrowers in that case present a higher risk for lenders, subprime mortgages typically charge higher interest rates than standard (prime) mortgages.
3. The most common type of subprime mortgage contract offered in the United States is the adjustable rate mortgage (ARM), which charges a fixed interest rate for an initial period and a floating interest rate thereafter. The floating rate may be based on an index such as the federal funds rate, which is the rate at which banks lend money to each other overnight.
The sharp increase in subprime lending that occurred in the United States beginning in the late 1990s was primarily fueled by subprime mortgages. According to the Federal Reserve, the share of subprime mortgages among all home loans in the country increased from about 2.5 percent per year in the late 1990s to about 15 percent per year in 2004–07. One reason for the increase was aggressive marketing by mortgage brokers, who were paid commissions on the basis of the quantity, not the quality, of the loan contracts they sold.
The overuse of subprime mortgages and their widespread securitization was one of the primary factors that triggered the financial crisis of 2007–08 and the subsequent Great Recession (2007–09) after the demand for housing reached a saturation point in the United States in late 2007. As house prices plateaued, many subprime borrowers found themselves with houses they could not sell and with mortgages they could no longer afford. As they began to default on their loans and nationwide foreclosure rates hit record highs, banks and other lending institutions became less willing to lend to risky borrowers. As a result, subprime mortgages lost the wide popularity that they had once enjoyed among lenders in the United States.
4. Loans; Real Estate; Banking: subprime mortgage loan, subprime mortgage.
- Typically subprime mortgages are offered at interest rates above prime, to customers with below-average credit ratings. Subprime mortgage lenders in the U.S. tend to target lower-income Americans, the elderly, new immigrants, people with a proven record of not paying their debts on time–just about anyone who would have trouble getting a mortgage from a conventional lender such as a major bank.
- Subprime mortgage loans have a much higher rate of default than prime mortgage loans and are priced based on the risk assumed by the lender.
- “Subprime” refers to the risk associated with a borrower, not to the interest rate being charged on the mortgage.
5. Cultural Interrelation: We can mention the book
S: 1. Etymonline – https://www.etymonline.com/search?q=subprime+mortgage (last access: 26 November 2024). 2 & 3. EncBrit – https://www.britannica.com/money/subprime-mortgage (last access: 26 November 2024). 4. TERMIUM PLUS (last access: 26 November 2024). 5. (last access: 26 November 2024). 5. Amazon – https://www.amazon.com/Subprime-Mortgages-Americas-Latest-Institute/dp/087766739X (last access: 26 November 2024).
SYN: subprime mortgage loan (depending on context)
S: TERMIUM PLUS (last access: 26 November 2024)
