Glossary of terms

Equity: The difference between the market value of a property and the debt against it. For example, if your house is worth $250,000 and you owe $100,000 on your mortgage, you have $150,000 worth of equity in your house.

Equity stripping: Selling high-cost loans based solely on the equity of the house.

Predatory lender: Covers a variety of abusive lending practices, including selling a mortgage to someone who does not have the income to repay it, and charging higher interest rates that include unnecessary fees and charges. Also: failing to disclose the loan terms, or writing the terms in such a way as to ensure an unreasonable profit for the lender.

Prime borrower: Someone who can obtain the best interest rates on a mortgage because he or she has excellent credit.

Subprime borrower: Typically, someone who has a poor credit history or other factors such as insufficient funds for a down payment. Lenders deem such people to be at higher risk for not paying their bills, and they charge higher fees and interest to offset the perceived higher risks. People with good credit, however, also are sold "subprime" loans.

Source: Washington State Department of Financial Institutions