CURRENT ISSUE    THE SUBPRIME MORTGAGE CRISIS AND ITS         EFFECT TOWARDS CARIBBEAN                Serena Williams     ...
INTRODUCTION     Sub-prime mortgages are generally for borrowers      with a low credit score which include mortgages    ...
OBJECTIVE OF STUDY    The main objective of study is;     To identify the causes of subprime mortgage      crisis     To...
CAUSES OF THE SUBPRIME MORTGAGE    CRISIS     Housing bubble (Boom and bust in the      housing market)          -the hou...
CAUSES OF THE SUBPRIME MORTGAGE    CRISIS     High-risk mortgage loans and      lending/borrowing practices          -Ban...
CAUSES OF THE SUBPRIME MORTGAGE    CRISIS     Policy       Government policies       -( bubble of real estate loans)as a...
CAUSES OF THE SUBPRIME MORTGAGE    CRISIS     Inaccurate credit ratings     -The myth that subprime loans went only to th...
CAUSES OF THE SUBPRIME MORTGAGE    CRISIS     Deregulation opens door for subprime     lending     -led to new mortgage i...
CAUSES OF THE SUBPRIME MORTGAGE    CRISIS     Globalization (new technology) and the trade     deficit     -the use of ne...
THE EFFECT TOWARDS CARIBBEAN      Financial Sector      Economic growth      Flow of Remittances      Foreign Exchange...
CONCLUSION      This subprime crisis which originated in the      United States effects slowdown the whole      economic ...
THANK YOU          Q&A12
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Serena Williams (P SLIDE)

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Serena Williams (P SLIDE)

  1. 1. CURRENT ISSUE THE SUBPRIME MORTGAGE CRISIS AND ITS EFFECT TOWARDS CARIBBEAN Serena Williams Kennedy Andreas Ceorizan Ponis Chin Jo Jo Marcella Lapios Lim Su Loung Pressca Eva Gasinau1
  2. 2. INTRODUCTION  Sub-prime mortgages are generally for borrowers with a low credit score which include mortgages with very low or no down payments  study underlines several effects toward Caribbean Island likely trades activities, tourism sectors, Caribbean financial institution and also foreign direct investment (FDI).2
  3. 3. OBJECTIVE OF STUDY The main objective of study is;  To identify the causes of subprime mortgage crisis  To determine the effects of subprime mortgage crisis towards Caribbean3
  4. 4. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Housing bubble (Boom and bust in the housing market) -the housing bubbles are happen cause of the US house prices rose dramatically from 1998 until late 2005 (John Marshall, 2009)  Homeowner speculation -approximately one million borrowers took subprime mortgages to finance the purchase of their first home. -Many homebuyers with subprime loans were4 defaulted
  5. 5. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  High-risk mortgage loans and lending/borrowing practices -Banks offered easy access to money before the mortgage crisis emerged -Borrowers got into high risk mortgages  Securitization practices -Ben Bernanke stated that securitization markets remained effectively shut. -The relationship between securitization and the subprime crisis relates to a fundamental fault.5
  6. 6. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Policy  Government policies -( bubble of real estate loans)as an effect of too much liquidity placed on the market by strongly expansive monetary policy of the Fed of Greenspan.  Policies of Central banks -Central bank less concerned with avoiding asset price bubbles, such as the housing bubble and dot- com bubble.6
  7. 7. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Inaccurate credit ratings -The myth that subprime loans went only to those with bad credit arises from overlooking the complexity of the subprime mortgage market  Oversupply of US Dollars  distort real economy -led to the increased of commodity prices, inflation and reduced the purchasing power parity of US dollar.  making financial institutions lowering lending criteria -contributed to the subprime mortgage crisis because people could not repay their loans.7
  8. 8. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Deregulation opens door for subprime lending -led to new mortgage instruments and cause many borrowers failed to understand and could not afford.  Reckless lending of financial institutions -allows the unsuitable borrowers to get credit8
  9. 9. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Globalization (new technology) and the trade deficit -the use of new technology the exploitation of cheap labor on a world scale intensified, sped-up in real time, and reached further distances. -deficit was resulting from U.S. investment exceeding its savings, or imports exceeding exports.  Credit default swaps (CDS) -payments under a CDS would only be triggered by the companys failure to pay interest or principal on its debts due to bankruptcy or some other severe9 liquidity issue.
  10. 10. THE EFFECT TOWARDS CARIBBEAN  Financial Sector  Economic growth  Flow of Remittances  Foreign Exchange Reserves  Tourism  Cost of Borrowing  Foreign Direct Investment (FDI)  Other Export Earnings10
  11. 11. CONCLUSION  This subprime crisis which originated in the United States effects slowdown the whole economic in the world includes developing countries such as Caribbean.  So the role of government as the intervention is necessary and appropriate to became as intermediaries in Caribbean.11
  12. 12. THANK YOU Q&A12

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