Sub prime mortgages have been the cause of a global financial crisis that started in the US in the late 2006. Sub-prime mortgages are just one of the many varieties of sub prime loans that are provided for diverse needs.

In essence, a sub-prime mortgage is one that is provided to people who do not have a good credit history. People with a poor credit history will not be able to avail a mortgage from a regular bank because they may not be able to repay the debt that they avail. Such borrowers have a FICO score that is less than 620. However, sub-prime mortgage providers provide loans to such risky classes of people. The mortgages are also called as Near Prime, B-Paper or second-chance lending. Mostly, people who are self employed and those who have a bad credit history fall into this category. The name comes from the fact that it refers to property whose papers cannot be sold in the primary markets.

Since the mortgage is provided to people with a bad credit history, sub prime mortgages are risky to both the lender as well as the borrower. The lender has to take a certain amount of risk because they are not sure how the borrower will pay back the mortgage. On the other hand, borrowers will have to pay higher interest for the mortgage that is availed. The higher interest is charged in order to sideline the higher risk.

The sub prime market is also believed to be influenced by non-competitive business practices. For example, sub-prime mortgage lenders have been accused of providing sub prime loans far in excess of what can be repaid by borrowers. This often results in people losing their assets to sub-prime lenders when they are not able to meet repayment obligations. Since sub-prime mortgages are provided as a secured loan, people who are not able to repay a mortgage will often find their assets being claimed by sub prime vendors when repayment defaults.