Housing Bubble Formation Research Paper

On account of the housing bubble formation, it was believed by investors and lenders that property value/housing was a good investment. Interest rates were low so property value was high due to buyers being able to afford to buy a house. Bankers developed a mortgage program known as subprime mortgages geared towards borrowers that had no credit history or that had bad credit (inability to pay back) to take out loans. The more affordable the loans were, the more people borrowed money. Banks began to lower their standards and allow borrowers with poor credit to get approved for loans that only prime borrowers would qualify for. Banks also took larger risks by collaborating with investors. During the time of the housing bubble, many people became
home owners, profits were increasing, and money was flowing smoothly through the economy. They did not expect property value to decrease.