Question

TOPIC ONE: Briefly describe one of the following kinds of mortgage and 1) identify who might...

TOPIC ONE: Briefly describe one of the following kinds of mortgage and 1) identify who might benefit from this kind of mortgage and 2) explain why widespread use of this kind of mortgage might create risks for banks

Subprime mortgage

2/28 ARM (or other forms of subprime mortgages that reduce monthly payments e.g. “interest only loans”)

Low doc or no doc loans

NINJA loans

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Answer #1

SUBPRIME MORTGAGE

It is the type of loan which bank provides to the borrower with a low credit score,deficient credit history and who falls into the non elegibility criteria of the conventional mortgages.

  1. The people with low credit score and deficient credit history gets benifitted from subprime loan as they get a chance fulfill their requirment even with their bad credit history.
  2. Widespread use of this kind of mortgage might create risks for banks because the chances of defaulting gets higher.
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