Subprime mortgages are generally granted to borrowers who cannot obtain conventional mortgages due to insufficient or delinquent credit histories. These borrowers may be forced to take interest-only loan, which have lower monthly payment but are very difficult to pay off in the end. Problems with mortgage financing are the generally accepted cause of the financial meltdown that occurred between 2007 and 2008 (Gorton, 2009). The Subprime Mortgage Crisis, or "mortgage mess" or "mortgage meltdown," was caused by a precipitous rise in home foreclosures that started in 2006 and spiraled out of control in 2007 and 2008. The excessive use of subprime lending during the housing bubble caused an unprecedented foreclosure fallout, the effects of which caused credit markets as well as global and domestic stock markets to face a major financial crisis (Mayer, 2008). The goal of this paper is to address the subprime mortgage crisis, the effects prior to and after the crisis, and discuss who were the biggest players affected by this crisis. Finally, Team A will provide several concepts learned during the course of this class, which may help ensure that something similar does not happen again in the future.…
“Let’s hope we are all wealthy and retired by this house of cards falters” (Bloomberg, 2007). The credit crisis is known as the “House of Cards”, for years the banking industry has transformed many American lives, which has resulted in a troublesome economy. Many factors led to the credit crisis, such as the rise and fall of the housing market, and inaccurate credit ratings helped to create the sub-prime mortgage crisis (Issues & Controversies, 2010). Low interest rates developed easy credit, in which people could get a mortgage and credit cards based on inaccurate credit ratings with the creation of sub-prime mortgages. People have the ability to own a home, with no down payment or fixed income. In August of 2007, the United States began a loss of confidence in securitized mortgages, which resulted in the Federal Reserve injecting $20 trillion dollars into the financial markets to ease the situation (“Obama Sends Warning to Big Banks, 2010). The most important question to be answered in the decade is “How a loss of $500 billion dollars from the sub-prime mortgage resulted in a $20…
Burning Down the House: Mortgage Fraud and the Destruction of Residential Neighborhoods Ann Fulmer March 2010…
I. Overview - The Emergency Economic Stabilization Act of 2008 (commonly called The Bailout Bill and The American Recovery and Reinvestment Plan of 2009 (commonly called The Stimulus Bill) involved massive amounts of taxpayer dollars into the faltering U.S. economy. However the level of bi-partisan support was drastically different. How did the 2008 and 2009 political environments lead to the vastly different levels of support for the “Bailout” and “Stimulus” Bills?…
The current housing crisis in Maryland has devastated much of the inner city of Baltimore and surrounding counties. The economic collapse of 2008 has left many Maryland residences unemployed or underemployed. The direct impact of the economic collapse has left homeowners wondering how they will pay their mortgages and keep food on the table. Maryland homeowners have been struggling to make ends meet. Some of the issues that are being faced have to do with the predatory lending practices of some mortgage lenders. President Obama signed an agreement to bailout some banks in hope to spare families from losing their homes. Those hopes did not pan out well. There was another bailout of $25 billion dollars allotted in Feb 2012 to help homeowners and reduce mortgages to the principal home values. Thus far the mortgage industry has done as little as possible to hold up their end of that bargain. We need to get educated and hold these predatory lenders accountable.…
Many mid-sized banks with little or no sub-prime exposure and well-managed “capital cushions” were fortunate enough to avoid the burns of the sub-prime mortgage meltdown. However, many stood by nervously as the larger banks took the majority of the write-down body blows. While bankers and business leaders everywhere hope that the worst has passed, the aftershocks have left many with the premonition that the…
When the U.S. economy began to melt down in 2007 and entered a rapid period of decline in 2008, all eyes were fixed on the subprime mortgage crisis. Though the mortgage crisis, triggered by spurious lending practices and unprecedented risky investment bank practices, was undoubtedly the dominant factor affecting the American consumer in 2008, credit card debt and default was also making a contribution to the deteriorating economy and collapsing standard of living. As the subprime mortgage crisis accelerated, the increasing number of people falling behind on payments or defaulting on credit card debt…
“Real estate values have deflated to such an extent that a record number of people owe more than their homes are worth. That’s not the American Dream – it’s a nightmare”…
Real-estate market was exceptionally prosperous. The number of Americans owning their own homes reached an unprecedented record of forty nine percent. A similar phenomenon occurred between the years of 2006 and 2008. Everyone was taking advantage of the easy access to mortgages. Analysts show that during this period, about sixty eight percent of Americans owned their homes. This real-estate boom all ended when a wave of foreclosure hit the financial sector globally. This situation was worsened by the steep decline in house prices which left home owners unable to pay or refinance their…
Predatory lending has caused many conflicts in the American society. Victims who fall for predatory lending are usually low income homeowners or those having financial difficulties. Consumers do not realize that mortgage payments are impossible until 3-4 years after predatory lending. This imposes a significant role in the destruction of the American dream. Constance M. Ruzich, a teacher at Robert Morris University in Pittsburgh, and A. J. Grant, also a teacher at RMU, state in their essay, “Subprime mortgages are home loans made at higher rates of interest to burrowers who represent higher credit risks and have lower credit scores.” People with subprime mortgages have a difficult time paying their taxes. Predatory lending, or subprime mortgages, has significantly taken part in the downfall of the economy. Ruzich and Grant say, “Ten years ago, few Americans had heard of subprime mortgages or predatory lending, but by 2008, a survey of economists had identified the effects of the mortgage crisis as the number one threat to the U.S. economy, greater than that of terrorism or conflict in the Middle East.” This statement shows how these lendings have affected the economy at a reasonably rapid rate. The economy of the United States has crumbled at a very accelerated rate like a house on fire. It is no longer what it used to be and in only getting…
In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who: Sell properties for much more than they are worth using false appraisals. They encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan and knowingly lend more money than a borrower can afford to repay. The problem has continued to get worse to the point where some lenders charge high interest rates to borrowers based on their race or national origin and not on their credit history. They outrageously charge fees for unnecessary or nonexistent products and services and even pressure borrowers to accept higher-risk loans such as balloon loans, and steep pre-payment penalties. Some lenders shamelessly continue to use high pressure sales tactics to sell home improvements and then finance them at high interest rates.…
With hundreds of daily messages produced from financial institutions and mortgage organizations, it is often difficult to separate it all. What is good? What messages have a hidden agenda? Much of the information made available to seniors is beneficial except when true information begins overlapping with myths. The myths will cause seniors to become very weary of reverse mortgages and often question every source from which they receive information. There are many myths floating in the air and it is time to dispel these myths with honesty and facts once and for all.…
Introduction – Like so many others, I always believed that buying your own home was a part of the American Dream, and showed a sign of maturity and accomplishment. The first chance I could, I decided to make that big step and went out and bought me my first home. Monthly mortgage, homeowner insurance, association fees, lawn and home maintenance, and property taxes to name a few, proved to be more than I could handle on a long-term basis. When I started to become a financial burden, I ended up putting my house up for sale, and moved to a rental I was able to afford.…
bargain?" The American Prospect 20.9 (2009): A2+. Opposing Viewpoints in Context. Web. 7 Nov. 2014.…
culture, one with enduring significance. During the years preceding the credit market collapse in 2008, the subprime mortgage industry thrived. Individuals with bad credit were given access to loans that weren’t supposed to be able to go to them. But as long as home prices were on the rise, these poor lending practices were simply ignored. Lenders could afford to write poorly used loans as long as the homeowner's equity outpaced their desire for new debt. If borrowers were to fail to payback their loans, lenders could always foreclose on the home, since it was an asset with ever-increasing value. The credit market's problems began when housing prices started to fall in 2007. Homeowners frequently found themselves with underwater loans, owed lenders more than the home was worth and when faced with these facts, homeowners began to fear the threat of foreclosure. Even more disturbing was the fact that some families abandoned their homes; choosing to start their lives anew elsewhere rather than worry about paying off their debts. Many Americans had wages lowered, resulting in strike, others were laid off or fired. This caused a major debt in the economy and stunted the growth of…