Background on the subprime mortgage market Subprime loans are associated with high credit risk because the borrower lacks a strong or lengthy credit history or has other characteristics that are associated with high probabilities of default.
The expansion of subprime lending since the mid-1990s has been quite substantial, with the number of subprime mortgage loans now totaling 7-3/4 million, or 14 percent of the overall mortgage market. Technological advances and financial innovations that reduced the costs of lending to higher-risk households contributed importantly to the expansion of the subprime market.