Final answer:
Subprime mortgage loans are typically given to borrowers with poor credit, and they played a crucial role in the financial crisis by contributing to a housing market bubble and leading to bank failures. The securitization food chain allowed lenders to sell off the risk, which promoted an increase in the issuance of high-risk loans, including the notorious NINJA loans.
Step-by-step explanation:
In the context of the global economic crisis, the statement that is true of subprime mortgage loans is that they are typically given to borrowers with poor credit. Subprime loans, often associated with higher interest rates and less favorable terms to compensate for the higher credit risk, played a significant role in the global financial crisis of 2007-2008. Financial institutions issued these loans with lower underwriting standards and then bundled them into collateralized debt obligations (CDOs). These were incorrectly rated as safe investments by credit rating agencies, contributing to a housing market bubble and eventually leading to numerous bank failures.
Lenders were incentivized to make more subprime loans, knowing they could securitize them and sell the risk to other investors. This practice was part of a financial model known as the securitization food chain, which amplified the demand for subprime loans and their impact on the housing market. A noteworthy aspect of the subprime loans during the mid-2000s is what economists referred to as NINJA loans, standing for No Income, No Job, or Assets, exemplifying the absence of proper scrutiny in issuing these loans.