In recent years we have heard a lot about subprime mortgages, especially in relation to the serious economic crisis that started with the Wall Street financial system and that hit the economies of most western countries. But what are subprime mortgages?
These are high-risk mortgages , both for the creditor and the debtor, which were granted to subjects who are usually not given a loan: not only to those who had no way to provide an advance, but also to people with obvious problems of solvency (for example with precarious work) or with a previous history of insolvency. We know, in fact, that the request for a loan must be given to the credit institution with which certain guarantees are related and one of these relates to its own credit history . Who in the past, that is, has not fulfilled its debts (of any kind, from the car lease installments to the rent) will not have very easy access to a loan.
Subprime mortgages are therefore characterized by the debtor profile, so much so that B-Paper , near-prime or second chance are also defined, just to indicate what in Italy we would call a “series B” loan. Given the very high risk of default of these loans, creditors applied very high interest rates (in particular after the first installments, smaller) or granted loans to cover those already issued.
In this way the financial agents could cash in their commissions and the subprime mortgages went to feed the securitization system: the Wall Street operators resold these mortgages, after having divided them into shares, into share packages called ABS (Asset Backed Security, covered securitization) from the houses given as a guarantee) which were in turn resold in other packages, whose interests could be collected and in which other “poor” or very risky financial products ended up, such as CDOs ( Collateralized Debt Obligations ) bonds which have guarantees as guarantees “Collateral” a debt. This complex system, once imploded, has decreed the end of very large US financial companies, such as Lehman Brothers , and generated in 2008 the global financial market crisis that everyone knows.
But do subprime mortgages exist in Italy? If it is true that the crisis started by the United States has also affected our country, it is also true that the European and Italian financial world has only partially adopted these credit systems. In Italy, however, there are other forms of credit to subjects “at risk” , in this case we do not talk about subprime mortgages, but mortgages without advance, loans to bad payers or protesters, very special cases for which credit institutions create specially designed loans.