Final answer:
A subprime mortgage is a loan given to borrowers with a poor credit rating, which is option (a). These loans are characterized by higher interest rates to offset the risk of default and were a significant factor contributing to the financial crisis of 2007-2008 due to widespread defaults and the securitization process.
Step-by-step explanation:
A subprime mortgage is a type of mortgage offered to borrowers with lower credit ratings. The correct answer to fill in the blanks would be: 'Subprime mortgage is a loan given to borrowers with a poor credit rating.' Therefore, the answer is (a) Loan; poor.
Subprime loans typically feature interest rates that are higher, often adjustable, than conventional mortgages to compensate the bank for the increased risk of default. This type of lending was prevalent during the early 2000s and was a major factor contributing to the financial crisis of 2007-2008.
Moreover, the phenomenon of securitization led banks to make riskier loans, including those termed as NINJA loans, without adequate checks for the borrower's ability to repay. This system eventually led to a high rate of defaults and had a devastating impact on the larger economy, contributing to the 'Great Recession.'