Subprime mortgages are home loans extended to individuals who have poor or limited credit history and hence may not qualify for traditional home loans. These loans come with higher interest rates and fees to compensate for the increased risk. They are not covered by reserve requirements of commercial banks or backed by the Treasury as suggested in options A and B.

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Subprime Mortgages

Question 8

Multiple Choice

Subprime mortgages

A) are loans covered by reserve requirements of commercial banks.
B) are home loans backed by the Treasury.
C) are home loans given to individuals without credit to meet the loan requirements.
D) none of these choices.

Correct Answer: