Sub-prime lending extends credit to people who do not have access to the regular credit market.
It could take the following forms:
- Loans to borrowers who have an existing history of loan delinquency or default
- Loans to borrowers already bankrupt
- Loans that do not meet guidelines stipulated by Fannie Mae or Freddie Mac
- Loans based on property that cannot be sold on the primary market
Such borrowers who obtain funding on a sub-prime basis are termed as sub-prime borrowers.
Please enrol me for the free email course
on Basics of Accounting for Financial Instruments
Join our mailing list to receive the latest news and updates from our team.