What technological innovations led to the development of the subprime mortgage market?
A subprime mortgage refers to the kind of property loan that is offered to a borrower whose credit rating is low. The rate of interest charged by the lenders on this type of loan is higher than that of a prime mortgage to act as compensation for the high risk of default payment. The relationship between the subprime mortgage and the interest rate depends on some factors, including the delinquencies present on the report, the number of the borrower's late payment, the amount of down payment placed, and the borrower's credit score.
Answer and Explanation:
The innovation of computer technology and new techniques in statistics called data mining caused the formation of the subprime mortgage market. Through this technology and techniques, an increase in the qualitative evaluation was experienced on individuals who are seen as credit risk. The methods are used in the calculation of the rates of interest to be charged on the mortgages taken by these individuals.
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from Finance 102: Personal FinanceChapter 7 / Lesson 4