U.S. Subprime Mortgage Crisis Essay

U.s. Subprime Mortgage Crisis Essay
The U.S. subprime mortgage crisis was a set of events and conditions that led to the late–2000s financial crisis, characterized by a rise in subprime
mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. After U.S. housing sales prices peaked in
mid–2006 and began their steep decline, refinancing became more difficult. As adjustable–rate mortgages began to reset at higher interest rates,
mortgage delinquencies soared. Securities backed with mortgages, including subprime mortgages, widely held by financial firms, lost most of their
value. Global investors also drastically reduced purchases of mortgage–backed debt and other securities as part of a decline in the capacity and
willingness of the private financial system to support lending. Concerns about the soundness of U.S. credit and financial markets led to tightening
credit around the world and slowing economic growth in the U.S. and Europe.
The immediate cause or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006. Caused
by an increase in loan incentives such as easy initial terms and a long–term trend of rising housing prices had encouraged borrowers to assume difficult
mortgages in the belief they would be able to quickly refinance at more favorable terms. Once interest rates began to rise and housing prices started to
drop moderately in 2006 in many parts of the U.S., refinancing became more difficult. As
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The Cause of Global Financial Crisis
в… the causes of global financial crisis
1гЂЃBoom and burst in the housing market
Low interest rates and large inflows of foreign funds created easy credit conditions. Subprime lending contribute to increase the housing demand.This
fueled rising house prices.This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates. This led to a
building boom. Easy credit encouraged borrowers to obtain ARM. If borrowers could not make the payments ,they would try to refinance. Refinancing
became more difficult, when house prices began to decline in USA. Borrowers found themselves unable to afford higher monthly payments ,then
default. This places downward pressure on housing prices.
2гЂЃSpeculation ... Show more content on Helpwriting.net ...
в…Ў Explain how the subprime crisis of the US spreads to the whole world?
The subprime mortgage crisis is an ongoing financial crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United
States, with major adverse consequences for banks and financial markets around the globe. Apart from the fact that banks based in other parts of the
world also suffered losses from the subprime market, there are two major ways in which the effect is felt across the globe.
First, the US is the biggest borrower in the world since most countries hold their foreign exchange reserves in dollars and invest them in US securities.
Thus, any crisis in the US has a direct bearing on other countries, particularly those with large reserves like Japan, China and so on.
Also, since global equity markets are closely interlinked through institutional investors, financial crisis affecting these investors sees a contagion effect
throughout the world. The panic psychology takes over and a large number of people cash in their chips. This disturbs global financial market further.
For emerging market countries, in the first place, the crisis derived from the setback in exports of goods and services to the European and American
countries, but not the collapse of the banking system. People claims that the model of crisis transmission in USA is from virtual economy to real
economy, however, the harsh

Solving The Subprime Mortgage Crisis
Introduction:
Subprime represents the borrowers with weak credit history including defaults, bankruptcies etc. The U.S subprime mortgage crisis was a situation
where the subprime borrowers started defaulting their loans and sharp reduction in home prices occurred as a result of which the heavy investors in
mortgage sector suffered substantial losses. These crises created a global impact and triggered adversity throughout various sectors in the economy.
Events That Lead To Subprime Mortgage Crises (Causes):
Mortgage backed securities:
Previously banks extended credit to the applicants for mortgages and these mortgages were kept in the books of the banks and they were accountable
and responsible for any default. Therefore, inorder to alleviate the chances of default, due diligence (inquiry of credit history) was exercised. However,
major drawback to banks was that their funds locked up for long time period. Therefore new phenomenon was introduced according to which the
originators of mortgage loans could sell that mortgage rapidly in the secondary market in the form of securities. This was also termed as originate to
distribute model. For implementing this concept,mortgage backed securities were created through which the mortgage initiator would sell the streams
of mortgage loans to the investment banks which would later sell it to the investors and they would receive the interest payments.
Moreover, many credit worthy customers already purchased homes so banks started

The Issue Of The Subprime Mortgage Crisis Essay
Background:
The Subprime Mortgage Crisis or so called "United Housing Bubble" is considered as the most serious recession after 1929. The crisis involved not
only one or couple companies but the whole U.S. Financial and Real Estate industry. Furthermore, the crisis lead to millions of people in US lost their
houses, or homes and several industry giants failed down like Lehman Brothers, American International Group, and Merrill Lynch and so on. The effect
of the crisis influenced not only America but also the economics of the whole world in the next few years.
A very direct and well–known background of the crisis is the relatively high default rate in the subprime housing mortgage sector as well as known as
the main reason of the crisis. On the other side, the background of the crisis in terms of political side can be traced back to 30 years ago as the
acceleration of the implementation of new liberal economic policies. The new liberal policy is an idea which lessen the regulation of the financial and
labor market by the government of U.S. It also encourages to promote consumption in order to drive high economic growth.
2).
Despite the derivative tools that have been abused used which derived the crisis . A very important underlying reason of the crisis is that the
government wanted a higher economic growth and less restrictions of financial industry. Based on the assumption, from the Appendix __, we can see
that the housing price in the US were constantly increasing.

The Collapse Of The Subprime Mortgage Market Causing A...
The collapse of the subprime mortgage market causing a global financial crisis (GFC) in 2007, has given the concept of securitisation a bad name.
Securitisation is the process of conversion of receivables and cash flow generated from a collection or pool of financial assets into the marketable
securities. Any asset that generates a cash flow can be securitised, which are then sold to capital market investors. Asset securitisation is the process
whereby interests in loans and receivables are packaged and sold in the form of an asset–backed security (ABS). An ABS is the bond or notes backed
by some financial assets. These assets consist of receivables such as residential and commercial mortgage loans, automobile loans, and credit card
financing. Mortgage–backed securities (MBS) are bonds that are backed by pools of mortgage loans. Examples include mortgage papers, house
papers, and land and property papers. Thus in–turn, reflective of the underlying assets in the security are these two terms. Additionally, securitisation is
a method of financing assets, to serve as the main source of payment to investors, it usually depends on cash flow generated from principle and interest
repayments.
Securitisation is one of the most fundamental and complex concepts in the world of finance. The non–existing industry began in the 1970s when home
mortgages were pooled by U.S. government–backed agencies. Ten years later, financial institutions and businesses from all different aspects used

The Mortgage Crisi- Cause and Effect
The 21st Century Mortgage Crisis ENGL106 January 22, 2011 Abstract The 21st century mortgage crisis is certainly a key factor to the current
financial catastrophe. There are multiple events that contributed to the downward spiral of the mortgage business. The crisis can be directly linked to
the overzealous dreams of home ownership to the manipulation and failure of capitalism. What started out as mortgage bankers' relaxed and
deregulated approach to funding unqualified lenders has turned into an unprecedented mortgage crisis which has greatly impacted the global markets.
The 21st Century Mortgage Crisis The mortgage crisis is a shock wave that has traveled through the economic leaving all in its path searching to pick up
... Show more content on Helpwriting.net ...
Bear Stearns, Credit Suisse, Lehman Brothers were making millions securitizing debt and millions from fees (Muolo, 2008). Some of the largest
corporations have billions of dollars in mortgage assets on the balances sheet and issuing MBS and other complicated financial instruments to domestic
and global investors the market became saturated with risk. In 2007, the housing bubble burst, the main contributor was due to the correction of the
Fed Fund interest rates. When interest rates began to increase the home sales decreased, the housing price crashed– meaning that the value of the
homes spiral to all time low. The mortgages on millions of homes became worth more that home itself, this cause many homeowners to default of
payments and foreclosure roused at an alarming rate. With the massive defaults devastating the markets it undermined Wall Street's financial
instruments and forced some of the countries' largest corporations into a tail spent of chaos. The mortgage crisis was officially formed like a
tornado leaving a path of destruction. Due to the default of payments the MBS and related instruments rippled through the global economy like wild
fire. Due to all the toxic assets held by banks and corporation forced a credit freeze and cause the bankruptcy of Fannie Mae and Freddie Mac along
with the failure of Lehman Brothers. To "Big to Fail" became a hot topic forcing the government and the Federal Reserve

Financial Crisis And Responsibility With The Toxic...
Abstract The case study discusses about the problems of meltdown of American economy due to the toxic subprime mortgages. This study
combines the financial crisis and responsibility with ethical issues and moral hazards. It also gives a detailed description about the failure of
world's largest economy and tried to calculate its impact across various stakeholders. It goes inside the facts and analyzed different stakeholders'
roles and responsibilities towards the crash. It also discusses about the government's policies which further contributed towards the destruction and
had huge impact not only in one sector but also to many other countries, which took years for its recovery. Introduction The author discusses about
the meltdown of American economy which was in danger due to the toxic mortgages. The crisis happened after US housing market crashed and it
created problems for all those investors who had invested billions of dollars in it. Many banks and insurance companies started failing one after
another and it created a cascading effect not only to other sectors in US but also to other dependent countries as well. Credit market froze and trust
in the financial system was decreasing day by day. The problem was so severe that the entire economy would have crashed in a matter of days if no
action was taken on time. This case studies and analyses about the issue based on Frontline's coverage from the board rooms of the Wall Street to the
banks in Washington (Pbs,

The Foreclosure Crisis And The Subprime Mortgage Crisis
Approximately five million homes have been foreclosed since 2007 which, along with an untold amount of short sales, have caused an estimated $1
trillion in lost wealth in the United States. This crisis affected our minority populations and their communities to a larger extent with estimations of
17–20 out of every 1000 minority homeowners suffering foreclosure versus only 10 out of every 1000 Caucasian homeowners. This was due to
targeting by the subprime mortgage companies specifically targeting African–American, Hispanic and Asian buyers with risky mortgages even when
they could have qualified for prime loans. Also affected were many who lost their homes due to income loss due to the Great Recession which had its
beginning in the subprime mortgage crisis. Many of those that have lost their homes during this crisis are interested in being homeowners again and
this essay will cover some possible ways for all of these boomerang buyers to enter into the housing market again.
Typically, rebound buyers (foreclosure, short sale) have had to wait an average of three to seven years after their foreclosure or short sale is
completed to qualify through a mortgage lender to buy another primary home. Currently, some of those restrictions are more relaxed and many of
these buyers have only had to wait three years and even as little as two years if they can find a loan backed by the Federal Housing Administration.
These FHA loan programs such as the Back to Work program require that

The Causes of Subprime Mortgage Financial Crisis Essay
The Causes of Subprime Mortgage Financial Crisis
By Jessica Tian
Abstract
The U.S. subprime mortgage crisis was a set of events that led to the 2008 financial crisis, characterized by a rise in subprime mortgage defaults and
foreclosures. This paper seeks to explain the causes of the U.S. subprime mortgage crisis and how this has led to a generalized credit crisis in other
financial sectors that ultimately affects the real economy. In recent decades, financial industry has developed quickly and various financial innovation
techniques have been abused widely, which is the main cause of this international financial crisis. In addition, deregulation, loose monetary policies of
the Federal Reserve, shadow banking system also play ... Show more content on Helpwriting.net ...
These brokers have neither the credit skills nor the interest to conduct proper payment due of potential homebuyers. Their interest is only in selling the
houses as fast as they can. The MBS instruments allowed all financial institutions to transfer the risks to other investors. The dissociation of ownership
of assets from risks encouraged poor credit assessment and was fundamental increasing the risks.
1.3 Collateralized Debt Obligations (CDOs)
Collateralized debt obligations (CDOs) refers to a kind of innovative derivative securities product which simply bundling mortgage debt, bonds,
loans and other assets together and then rearranging these assets into different tranches with different credit ratings, interest rate payments, risks, and
priority of repayment to meet the needs of different investors. As borrowers began to default, investors in the inferior tranche of the CDOs took the
first hit, so the owner of this tranche of CDOs may be riskier. In order to compensate for the higher risk, the subordinate tranche receives higher rate
of return while the superior tranche receives lower rate but still nice return. To make the top even safer, the banks ensured it small fee called the
credit default swap (CDS). The banks do all of the works so that creating rating agencies will stamp the top tranche since as a safe, triple A rated

Why The Subprime Mortgage Crisis Happened You Have Go Back...
To properly understand how and why the subprime mortgage crisis happened you have to go back a couple of years. In the past, lenders would deny
mortgage request to potential homebuyers with a below credit average history, looked for high payment loans, or paid small down payments. Families
listed as High–risk could get small mortgages backed by the Federal housing administration and those with limited credit options had to rent. In this era,
there were low mortgage foreclosure rates, and house prices and home construction correlated with income and mortgage interest rates.
Throughout the early to mid–2000s, lenders started funding mortgages by repackaging them into pools and selling them to investors. Lenders also
started to sell high ... Show more content on Helpwriting.net ...
were unheard of. The sustainability of new mortgage products had not been properly tested and the risk of PMBS was not understood. This was mostly
because loan quality was based on more traditional prime mortgages rather than subprime products.
When house prices finally peaked in 2004, refinancing mortgages and selling homes where no longer viable methods of settling mortgage debt. So,
there was a rise in mortgage loss rates for both lenders and investors. One of the leading mortgage lenders, New Century Financial Corp, wound up
filing for bankruptcy in April 2007, one of the first of many victims. Soon after various other subprime lenders had to close and several PMBS–backed
securities had to be downgraded to high risk. The collapse of bond funded subprime mortgages prompted lenders to stop making risky nonprime
mortgage sales. Demand for housing went down, lowered expectations brought the demand down further, and house prices fell so low that it became
very difficult for troubled borrowers to sell their homes.
Why did you choose to study this factor?
It is important to look at the link between shifty mortgage lenders offering low quality mortgages to buyers who can't afford them, because in
hindsight, it is clear how impactful these decisions proved to be not only for the American economy but for the global economy as well. The business
world is no stranger to "the butterfly effect" where isolated

U.s. Subprime Mortgage Crisis
The U.S. subprime mortgage crisis was a nationwide catastrophe that resulted in the increase of the default and foreclosure of home loans, and
consequent decrease in the value of mortgage–backed securities. The mortgage crash was a result of non–bank originators being insufficiently
regulated and engaging in excessive risk–taking behavior and questionable lending practices. However, the leading causes for the subprime mortgage
extend further than flawed lending decisions. The subprime mortgage crisis would not have occurred had it not been for a series of fundamentally
flawed government policies (Allen, 2015).
This paper will address the government policies in place that lead to the deterioration of lending standards, and the cycle being fueled by the practice of
securitization, and thus resulting in the subprime mortgage crash.
The mortgage crisis could not have occurred had it not been for the defective government policies in place (Allen, 2015). Prior to the mortgage
recession, the government had lowered the interest rates in order to try and stimulate the economy. This caused lenders to search for alternative ways to
increase their profits and as an answer turned to high–yielding mortgage–backed securities; however, lenders did not have a clear understanding of the
risk involved. The demand for the higher–yielding paper caused the process of mortgage bundling, where non–banks, who were financial institutions
with insufficient federal regulation oversight, were

Lessons Of Resilience : What We Can Learn From The...
Lessons in Resilience: What We Can Learn from the Subprime Mortgage Crisis Like all financial markets, the United States housing market is
characterized by its cyclical nature. Markets have ups and downs, peaks and troughs, and without variation, the housing market would not contribute to
economic activity in the way that it does. Still, while fluctuations are a necessary and often beneficial truth, housing disasters and market crashes are
crises that should and can be avoided with proper foresight. The 2008 housing market crash had consequences for the consumer and corporate sectors
as well as for the national government's international reputation. Through consumer education, corporate responsibility, and government regulation and
safeguards, the future housing market can serve to support, rather than hinder, the the United States and international economy. Consumers certainly
seemed to take the brunt of the losses from the subprime mortgage crisis. By the end of 2008 one in six homeowner's properties were in negative
equity, and many proprietors saw defaulting on payments as the only solution. The crisis on the whole only added to consumers' financial dilemmas, as
the already weakening economy and job market meant no one could afford the inflated prices. Some lost their businesses, some refinanced and
borrowed themselves into unforgivable holes of debt, and many aging homeowners found themselves unable to keep up with ever–inflating mortgage
payments while only supported

U.s. Subprime Mortgage Crisis
The U.S. subprime mortgage crisis was a catastrophe affecting both real and financial sectors of the global economy. It was estimated that 2.5
million borrowers had lost their homes due to foreclosures from 2007 to 2009 and whilst another 5.7 million homeowners were at pending risk of
foreclosure in the aftermath of the crisis (Williams, 2012). The failures and bailed out of large banking and financial institutions in the US, the UK,
Europe and others such as Bear Sterns, Lehman Brothers, Northern Rock, AIG, Freddie Mac, Fannie Mae and etc. including the major collapsed of
Iceland's systemic banking, characterised as one of the largest experienced by any country in economic history, is an emblematic of the excessive and
imprudent lending... Show more content on Helpwriting.net ...
that has been in upward trend until 2006 and so did the mortgage origination volume. Source: S&P Case–Shiller, Inside Mortgage Finance in Sanders
(2008)
Further supported by The National Homeownership Strategy, which targeted banking industry to enhance the availability of affordable housing via
creative financing (Whalen, 2008), mortgage brokers and lenders aggressively extended financings to the subprime borrowers without adequate risk
assessments on borrowers' credit ratings and leverage ratios. Incomplete and fraudulent loan application documentations thus, became a norm.
Subprime borrowers generally refer to borrowers with lack of creditworthiness, insufficient base income and high credit dependency. Lenders therefore,
imposed higher interest rates on mortgages extended to these high–risk borrowers, which eventually reduced their repayments capacity. At the same
time, it was perceived by many lenders that housing prices would keep rising, hence, the collateral valuation too, thus probability of default was
considered as low. The loans, which were priced using the Adjustable–Rate–Mortgages (ARM), basically offers low initial 'teaser' rates, which applies
over a certain period and resets to higher rates upon expiration of the adjustment period (Gapper, 2007). The innovation was intended to allow access
by the poor into the fold i.e. formal finance by enabling these borrowers to establish some credit profile with the bank, which would

Deregulation Created the Subprime Mortgage Crisis
Deregulation Created the Subprime Mortgage Crisis The mid–1990s saw an economic revival. What incited this activity was a technology boom like
no other. It created a new era of electronics and computing. There were cell phones, desktop and laptop computers, the Internet, electronic games, flat
panel TVs and major advances in business software and efficiencies. The housing industry was a big benefactor of this new economy. Home prices
began to rise again by 1996. The rate of home ownership during the 1970s, 1980s and the first half of the 1990s averaged 64.4 percent. The rate began
to rise in 1995, peaking at 69.2 percent in 2004. New housing rebounded. The economic turnaround brought California –– hit especially hard by the last
As reported by the Washington Post's Robert O 'Harrow Jr. and Brady Dennis in an article titled, 'The Beautiful Machine', "Financial Products unleashed
techniques that others on Wall Street rushed to emulate, creating vast, interlocking deals that bound together financial institutions in ways that no one
fully understood and contributed to the demise of its parent company (AIG) as a private enterprise...many of the most compelling aspects of the
economic cataclysm can be seen through the story of AIG and its Financial Products unit: the failure of credit–rating firms, the absence of meaningful
federal regulation, the mistaken belief that private contracts did not pose systemic risk, the veneration of computer models and quantitative analysis."
However, a November 13, 2009 column by Edward Pinto in the Wall Street Journal blames Congress and affordable housing programs, "Congress 's
goal was to force these two government–sponsored enterprises (GSEs Fannie Mae and Freddie Mac) to purchase loans that had been originated by
banks –– loans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low–
and moderate–income communities...from 1977 to 1991, $9 billion in local CRA lending commitments had

Subprime Mortgages : The Subprime Mortgage Crisis
During 2007 through 2010 there existed what we commonly refer to as the subprime mortgage crisis. Through deduction of readings by those
considered esteemed in the realm of finance – such as Ben Bernanke – the crisis arose out of an earlier expansion of mortgage credit. This included
extending mortgages to borrowers who previously would have had difficulty getting mortgages; this both contributed to and was facilitated by rapidly
rising home prices. Pre–subprime mortgages, those looking to buy homes found it difficult to obtain mortgages if they had below average credit
histories, provided small down payments or sought high–payment loans without the collateral, income, and/or credit history to match with their
mortgage request. Indeed some high–risk families could obtain small–sized mortgages backed by the Federal Housing Administration (FHA),
otherwise, those facing limited credit options, rented. Because of these processes, home ownership fluctuated around 65 percent, mortgage foreclosure
rates were low, and home construction and house prices mainly reflected swings in mortgage interest rates and income. The beginning of the crisis:
From the early to the mid–2000's, high–risk mortgages became available from lenders who funded mortgages by repackaging them into pools that
were sold to investors. New financial products were used to apportion these risks, with private–label mortgage–backed securities providing most of the
funding of subprime mortgages. The less

Recession Turmoil Caused By U.s. Subprime Mortgage Crisis
Wall Street turmoil caused by U.S. Subprime Mortgage Crisis had eventually evolved to global financial crisis. The financial crisis that has engulfed
the world is really a disaster, leading to precipitous shrinkage of human wealth and instantaneous evaporation of long–time efforts by financial
institutions. But why did such financial crisis take place? Who should be blamed?
As far as I concern, Federal Reserve deserves the greatest blame, as its ultra–loose monetary policy created housing bubble, sowing the seeds of crisis.
And its subsequent tighten policy pricked that kind of bubble, precipitatingsubprime mortgage crisis. Together with the former Fed chairman Alan
Greenspan indulged rampant financial derivatives,which made the economy worse off.
From 2001, Federal Reserve began to cut interest rates, and after cutting for 13 times, by june.2003, it reduced target rate to 1% which hit the lowest
level in the past 46 years. Due to such loose monetary policy, lending rates declined at the same time, 30–year fixed mortgage rates dropped from
8.1%in 2000 to 5.8% in 2003. In this case, Americans' house purchasing enthusiasm rose dramatically. And speculating on real estate appeared.
However bubble would burst eventually. From june.2005, Federal Reserve began to reserve its low interest rate policy, and raised its interest rates for
13 times, so by august.2006, Fed target rate was increased from 1% to 5.25%. The interest rates were put up continuously, which increased borrowing

The Subprime Mortgage Crisis Of The United States Essay
My Abstract:
The subprime mortgage crisis that took place in the united states was the start of events that led to the (2008) financial crisis, marked by a hike in
subprime mortgage defaults and foreclosures. I seek to discuss in my paper the U.S. causes that eventually led to the subprime mortgage crisis. Like,
low interest rates and housing prices, and how this eventually led to a localized credit dilemma in other financial regions that finally made a difference
in the actual economy or the financial system. In earlier years, financial economic activity had grown rapidly and varying financial invention methods
had been misused and abused vastly, which is the key cause of this multinational financial crisis/dilemma. In addition, the involvement of shadow
banking companies as they played an important role in the collapse of the financial system crisis. Furthermore, I plan to list each economic issues
included in this subprime mortgage crisis, as well as, other factors that eventually led to this crisis. I will be answering questions, such as the relief
measures that were used to restore life to the weakened financial system.
My Thesis Statement:
I plan to explain the actual causes that led to the Subprime Mortgage Crisis, as well as, the role shadow banking played in the whole matter before and
after the total collapse of the entire financial system. Moreover, I will be discussing five economic concept issues that were included in this subprime
crisis, along

The Subprime Mortgage Crisis in the U.S Essay
The argument over who should be at fault for the subprime mortgage crisis and housing market collapse in the United States has been a heated debate.
Even though home foreclosure keeps rising, there should be some accountability for the economic meltdown resulting from the subprime mortgage
situation. Should we blame banking institutions, mortgage lenders, brokers, and investors for this crisis? Should minorities be blamed for recklessly
accepting loans and defaulting on them after realizing they could not meet their obligation? Should we blame the government for their inactions for not
protecting victims of predatory lending?
Some will suggest that borrowers, banking institutions, mortgage lenders, brokers and investors, government, ... Show more content on Helpwriting.net
...
(Baker, 2008)
But government should force banks to work extremely hard with borrowers who are diligently trying to save their home. The time for action is now as
any inaction will only lengthen the crisis. The subprime mortgage crisis is an on–going financial problem and a housing market nightmare for the
United States economy. Some believe that a dramatic increase in mortgage delinquencies and foreclosures will caused a significant adverse effect on
banking institutions and financial markets. Thus far, the housing market has crumbled due to this mortgage crisis, resulting in elevated record number
of foreclosures. For many, the dream of home ownership has evaporated. How can this dream be re–established? Kevin Alexander Gray states "We've
got to do more to stem the tide of foreclosures and stabilize communities throughout the country," (Gray, 2009). What actions should be taken? Mr.
Gray points out, that the goal is to take corrective action to prevent a continuous meltdown.
But on the other hand, we need to ask the question, how did the subprime mortgage happen? It is important to understand how the economy has been
impacted by this foreclosure crisis. Also, it will be dispensable to look at what has really prompted the housing collapse. The immediate cause or
trigger of the crisis was the bursting of the United States housing bubble that peaked between 2005 and 2006, (Almendarez, 2009) This can be

The Subprime Mortgage Crisis
The Subprime Mortgage crisis
ECO 2072 Principles of Macroeconomics
In the beginning
One of the first indications of the late 2000 financial crisis that led to downward spiral known as the "Recession" was the subprime mortgages; known
as the "mortgage mess". A few years earlier the substantial boom of the housing market led to the uprising ofmortgage loans. Because interest rates
were low, investors took advantage of the low rates to buy homes that they could in return 'flip' (reselling) and homeowners bought homes that they
typically wouldn't have been able to afford. High interest rates usually keep people from borrowing money because it limits the amount available to use
for an investment. But the creation of the subprime mortgage ... Show more content on Helpwriting.net ...
Risky Business
Around 2006 the price of houses began to fall substantially fast. "The oversupply of houses and lack of buyers pushed the house prices down until
they really plunged in the late 2006 and early 2007" (The Subprime Mortgage Crisis Explained). These actions threw investors into a big dilemma. In
the beginning they believed buying the mortgages would bring them a profit, but quickly realized that the mortgages would cost them more financial
damage than reselling the homes. "Nationwide, home vales have declined about 16% since the summer of 2006 and experts project that the drop will
continue until homes have lost about 25% of their value" (Biroonak, 2008). In other words mortgage homes are "underwater", that is, the mortgage
owed equals or exceeds the value of the house (Biroonak, 2008). Investors and homeowners started to go more in debt trying to pay off their original
debts.
With all of the incentives and mortgage products given so easily to people that couldn't afford the high prices (including interest rates), many people
defaulted on their first mortgages because they were no longer were able to receive the profit from the homes they first intended to flip. "During the
first quarter of 2008, nearly 9% of all mortgage holders were delinquent or in foreclosure, the highest rate since recordkeeping began in 1979.
Foreclosure filings more than

How Is The 2007 Subprime Mortgage Crisis Different From...
How is the U.S 2007 subprime mortgage financial crisis different from other countries? Carmen and Reinhart paper answers this question in light of
historic crisis in Big Five developed countries and compares it with U.S 2007 crisis. In the second paper Kenneth Dam does an international
comparison of the weaknesses in the financial regulation which led to the subprime mortgage crisis. The subprime mortgage was invented to give loans
to less credit worthy people with higher interest rates. The lower credit quality ultimately led to massive defaults which decreased the housing prices.
The subprime mortgage crisis rapidly turned into a worldwide financial crisis because so many financial institution 's in different countries invested in
One thing that seems to deviate from the general trends is that U.S stock prices did not decrease like all the other nations before the crisis. Carmen
and Dam refer to this phenomenon as Greenspan put, because the chairman of the Federal Reserve Greenspan was notorious for constantly
pumping money into the economy and keeping interest rates artificially low. Also U.S deficits are much higher compared to other developed
countries before the crisis. U.S fiscal policy seems to be rolling over its debt in perpetuity and does not borrow with the intention of paying it all
back. Whether this fiscal policy is sustainable remains to be seen. Furthermore the decline in GDP growth seems to be much more severe and longer
in the Big Five countries compare to U.S. This again could be due to the active monetary policy of Federal Reserve in U.S and the constant
stimulation. Another notable thing is that public debt escalates after a crisis in all the countries. This could be due to increase federal government
spending after the crisis for bailing out companies and etc. Above are the indications that lead to crisis but what are the major causes of the crisis?
Dam's paper answers this question by first explaining the

Subprime and Adjustable Mortgages
Sometimes, when people buy a home for first time, they usually get subprime mortgage rates. Lenders grant these types of rates are to borrowers whom
their credit history is not sufficient to get a typical mortgage. Sometimes, these borrowers have bad or even insufficient credit history. Subprime
mortgages regularly offer loans that are interest only. These loans, that are "interest–only," are easier for buyers to afford. When you get one of these
loans, the lender does not require you to pay any of the principle for the first few years of the loan. Sometimes, borrowers think that they will refinance
their loan before they have to pay the principal and the monthly payment start to increase. When they cannot refinance their loans, they,... Show more
content on Helpwriting.net ...
This adjustment on their rates can increase the buyers' payments up to 100%. These adjustments, on their rates, make their mortgage payments
impossible. We can accredit this crisis to many factors that exist in housing and credit markets. Some of the causes are that homeowners unable to make
their mortgage payments because of the adjustable–rate mortgages resetting, borrowers overextending their payments, greedy lenders, high risk
mortgage products, high debts on personal and corporate levels, bad financial and housing policies, disproportion of international trade, and badly
chosen government regulation.
In addition, members of the market were looking for "higher yields" without realizing the risks and did not do proper research on the real estate
industry. Meanwhile, insubstantial financial standards, unreliable preparations of risk management, and gradually complex and not clear financial
products together created some weaknesses in the real estate system that led to the so–called "subprime mortgage crisis." These are some of the causes
of the subprime.
The effects of the subprime mortgage have been felt, in the United States, in different ways. It had a negative final impact in the United States, and it
created many foreclosure issues. The financial sector felt the crisis around February 2007. In this year, HSBC the "The Hong Kong and Shanghai
Banking

The Subprime Mortgage Crisis Devastated The Global...
Writing Assignment #2
Financial Market
Yuxue Zhang
The 2008 subprime mortgage crisis devastated the global financial market. People believed that the "Big Three" credit rating agencies played a
significant role at various stages in the crisis. The Reuters, in an article published in 2011, even claimed that credit rating agencies triggered financial
crisis. The Reuters believed that Moody's Corp and Standard and Poor's action of downgrading the rating on complex mortgages securities triggered
the worst financial crisis in decades. However, the problems of rating agencies have existed for quite a long time and accelerated the crash down in
some extend. Therefore, besides the "trigger", I regard the credit rating agencies as the ... Show more content on Helpwriting.net ...
Investors assume the credit rating agencies, which full of experienced finance experts, can present a trust worthy and correct rating of credit risks. By
implementing the external credit rating information, excessive trust in the system of credit rating agencies weakens investors' risk management
practices. Therefore, when those big, authoritative rating agencies rate those subprime mortgages as AAAs, investors put more money in the subprime
market and expected to make big money. At first, the investors did make a lot of money in subprime investments, and they invested more and more,
until they saturated the market. When the analysts in credit rating agencies eventually realized the bubble of the subprime market and they began to
downgrade large amounts of mortgage securities, it was too late. When people saw the decline of subprime market and an abrupt downgrading of
mortgage securities, the investors panicked and the market crashed. The rating from credit rating agencies accelerated the flourish of subprime
mortgage market at the beginning, and eventually pushed the process of the financial crisis. Then, why people should not trust the credit ratings? In the
year 2007, Moody downgraded over 5,000 mortgage securities. The downgraded mortgage–backed securities were totaled to $1.9 trillion; some
securities that had

Countrywide Financial Corporation And The Subprime...
Countrywide Financial Corporation and the Subprime Mortgage Debacle
In order to discuss the financial crisis of 2008, a person must understand the history of the mortgage industry. This case study shed light on one of the
leading companies in the mortgage industry, Countrywide Financial, helping people recognize the events that led up to the crisis of 2008 by providing
a breakdown of the company and showing the range of their operations (Eastburn, 2010, p. 247–262). To help people understand the crisis of the
mortgage company, strategies and plans will be discussed as well as a SWOT analysis on the industry that includes financial ratios, and
recommendations for the organization. By the end of this paper, there should be a better understanding of the issues that led to the financial crisis as
well as some ideas that may help them get back on track.
Strategies
Before 1929 loans were limited to a small percentage of people, and loan terms lasted from 3 to 10 years. Lenders provided roughly 60% of the
money needed to buy a home, and the buyer had to come up with the rest for a down payment. With these loans, interest payments were paid monthly
while the principal amount was due in full at the end of the loan term. These amounts could be rather large and led to people having problems paying
them. Between the Great Depression and terms of the loans offered, lack of payment became the normal (Eastburn, 2010).
Strategies were developed to aid in the financial crisis. The

Fraud, Subprime Mortgages, And The Hidden History Of...
Fraud, Subprime Mortgages, and The Hidden History of Financial Crisis "Hell is empty, and all the devils are here." –William Shakespeare (The
Tempest, Act1, Sn 2) Financial and economic experts still disagree over the specifics of what caused the recession of 2008. The fraudulent activities
which resulted from the subprime mortgage crisis were simply the combination of the perfect economic storm of opportunity meeting the ability for
mortgage bankers, corrupt politicians, Wall Street investors, and anyone else feeding from the real estate trough to recognize and capitalize on the
presented opportunity. Between the winter of 2007 and the summer of 2009, there was a national banking crisis which fed directly into the United
States recession and was initiated by a significant disintegration in housing prices directly after the housing bubble collapsed. The collapse of the
bubble led to a decrease in investment interests in residential property and to a higher mortgage rate delinquencies, loan defaults, and foreclosures
across the country.
Also, there was a complete collapse of the value for housing–related securities which led to a recession–level decrease in household spending and the
promise of outside business investments. The subprime mortgage crisis which led to the widespread use of fraud concerning

The Subprime Mortgage Crisis Of 2008
There have been many different theories that claim to provide reasons as to what caused the subprime mortgage crisis of 2008. Whether it was the
effects of the dot.com bust or unforeseen aftermath of the terrorist attack on September 11th, decisions made by congress, or money–hungry bankers
and investors or homebuyers themselves, this crisis veered the country into a financial catastrophe, claiming to be second to that of the great
depression. This paper will give an overview of the subprime mortgage crisis, discuss perceived causes, persons involved, persons affected and the
outcome it had on business practices and the country as a whole.
Subprime Mortgage Crisis of 2008
The subprime mortgage crisis is the financial banking crisis that stimulated the country's recession between the years 2007 – 2010. At the fountain of
the crisis was an expansion of mortgage credit to borrowers who previously would have difficulty being approved for loans due to low credit scores
and inadequate down payments. History tells a story that after the Great Depression, the government felt the need put regulations into effect to protect
investor's deposits. A new legislation known as the Glass–Seagall Act passed in 1933 was enacted not only protected investor's deposits but also
separate dealings of commercial banks from investment banks. As David Ingram wrote, "commercial banks manage deposit accounts, such as checking
and savings accounts, for individuals and businesses. They make loans to

The Financial Crisis Of The Subprime Mortgage Crisis
"The ongoing economic and financial turmoil that started in 2007 has again put financial institutions at the centre of harsh debate and massive
critism,......banks had gradually relaxed their screening and monitoring standards before the crisis, especially in the US subprime mortgage market.
Then, they sharply curtailed new credit and forced п¬Ѓrms to reduce their investments, hence propagating the financial crisis to the real economy,"
(J.Godlewski, 2013, p1).
The financial crisis which has been mentioned is the financial crisis occurred in 2008. Majority of consumers, companies and banks have
overestimated the income prospects so that excessive amount of mortgages have been agreed by banks without effectively considering potential risk. It
is claimed that lost incentives to the risk and lacked the effective risk management on the subprime mortgage loan in US partly initiated the financial
crisis. Since global economics closely integrated that serious economic and financial crisis spread to European as well. (Moro, 2013)
Considerable loss can also be reflected from different groups of people. Shareholders are proved to be the most seriously affected people. They suffered
from losing majority or even all of the equity capital in the failed banks. "Equity capital is the part of the share capital of a company owned by
ordinary shareholders," (Reverso, 2014). Depositors' bank account reduced while creditors of the banks cannot get their money bake either.
Furthermore, borrowers

Subprime Mortgage Crisis : An Example Of A Financial Crisis
Question1. Subprime mortgage crisis is an example of a financial crisis that affected global markets worldwide. Give another example of a financial
crisis in your discussions below.
The subprime mortgage financial crisis which happened in 2008 to 2009.this crisis leaves the world in frightened. Therefore financial economy is
totally unable to regain on the same situation. However to control the economy crisis and to avoid in the future for such situation we need to review
and need to avoid this situation.
Subprime Mortgage Bank burst real estate bubble crisis is considered to be the biggest cause of exacerbates. However, it is only the financial crisis,
due to the growing exposure to several factors. Some of the other causes of the financial crisis are as follows
1–
The collapse of the housing bubble A.: home prices have a significant impact on household wealth. Home prices almost 2006, 2007–2008 previous
doubled from 2000.According to the United States home price index for the first quarter of 2009 from the first quarter of 2008 fell 6.2%. Housing
and subprime mortgage prices increasing spending by people. Homes and residential investment falling by a sudden drop in the price of services
decreased income and savings; they enter a power saving mode led to forced.
2–
Increase the equity risk premium: United States of America and United States monetary tightening interest rates higher equity risk premium from the
market leaders. The failure of Lehman Brothers in 2008 to

The Subprime Mortgage Crisis Of 2008 Impacted The Us
How did the Subprime Mortgage Crisis of 2008 impacted the US
According to data from the United States Census Bureau: 501 thousand new single–family houses were sold in 2015 compare to 1,051 thousand in
2006. Real estate always impacted the economy by creating jobs and housing opportunities for families. But around 2006 because of a shortage of
homebuyer, the nation saw an increase in the number of mortgage credits and subprime loans granted which lead to the 2008 subprime mortgage crisis,
a nation wide banking crisis, putting the US economy in danger. A mortgage is a legal agreement allowing a person to borrow money to buy a
property under the conditions of paying it back over a certain period of years. A subprime loan means making loans to people who don't fully qualify
to be borrower; they often can't pay back on time due to unemployment, medical emergency, etc.
The subprime mortgage crisis of 2008 greatly affected the U.S. economy. The stock market and other industries were strongly impacted by the
mortgage crisis:
Many banks, mortgage lenders, real estate investment trusts and hedge funds suffered significant losses as a result of mortgage payment defaults or
mortgage asset devaluation. As of Dec. 21, 2007, financial institutions had recognized subprime–related losses or write–downs exceeding $80 billion,
with an additional $8–11 billion expected from Citibank (Bianco 14).
One of the immediate impacts from the financial crisis was on the banking sector.
Because more

Subprime Mortgage Crisis
What role did the Accounting profession play in the recent sub prime mortgage crisis? What could they have done differently?
What is a subprime loan? Subprime loans are unconventional loans designed to put as many people as possible in a home or to refinance an existing
home regardless of the borrowers' credit history. A subprimeloan allows lenders to make loans whether or not the borrower has poor credit, no credit
or even a very low Fair Isaac Corporation (FICO) score. Basically, subprime loans are creative ways to convenience someone that they can afford more
than they should.
Listed below are just some examples of subprime loans.
1.Fixed Rate Mortgage (FRM). A FRM has a fixed rate mortgage but the borrower usually has a much... Show more content on Helpwriting.net ...
Whether internal or external, auditing need to be truly independent. As global as the US housing market is, when auditors and business don't play fair
the world economy can crumble.
While I personally don't believe that accounting played a part in making the loans to people who could not afford them and in many instances didn't
understand or were blatantly lied to about the terms of the loans. I do believe accountants played a very big roll in not preventing the crisis. There
were several warning signs that the economy was on its way to crisis and it was ignored because in my opinion greed is more important than following
rules and regulations. Banks were making record profits making loans and then reselling them to investors that they didn't worry about the ramifications
of the highly risky loans.
What could have been done differently? The requirements necessary to get a loan such as FICO scores, debt to income ratios needed to consistent
between and among lenders. A cap on the percent of subprime loans a lending institution needed to be in place. Also, stringent guidelines need to be in
place to accurately estimate the loan loss allowances. As the amount of a mortgage lender's portfolio increases so should their loan loss allowances.
Better regulations need to be put in place that make it necessary to examine and reexamine the procedures used to determine the loan loss allowance
values and then to report the results

Subprime Mortgages And The Mortgage Crisis
Mortgage securities are crucial when it comes to the availability and cost of housing in the United States. This paper will analyze the mortgage
securities market, and how the market functions. It will also focus on the subprime mortgages created from 2000 to 2006. Suggestions will be
presented that would protect against the types of problems experienced in the mortgage securities market from 2006 through 2009.
Mortgage securities are considered an ownership interest in mortgage loans made by mortgage companies, commercial banks and other private entities
to finance the borrower purchase home or other property. Mortgage securities were created when the servicers pool loans for sale to investors. The
investors receive payments of principal and interest when mortgage loans are paid off by homeowners.
Investors in the secondary market often purchase mortgage securities after they are issued. Large institutions make investments in mortgage securities
when they are issues. Other dealers in a secondary market sometimes redistribute securities.
Mortgage securities are issued by the Government National Mortgage Association (Ginnie Mae), or by government–sponsored enterprises (GSEs) such
as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (Freddie Mac, 2002).
Mortgage securities are often priced at a higher yield that corporate or Treasury bonds. The opportunities for profit are also greater. Mortgage

The Downfall Of The Subprime Mortgage Market
The Downfall of the Subprime Mortgage Market During the housing boom, the subprime mortgage market enhanced the revenues of lenders,
investment bankers and investors alike. While some knew the trend would come to an end many did not. When the housing bubble burst and home
prices declined the effect on those involved was enormous, financial institutions who originally had low debt to equity ratios, soon found themselves on
the cusp of bankruptcy.
Housing Bubble Due to the U.S. Governments relaxed lending stipulations and low interest rates, the demand for houses soared from 1996 to 2006,
consequently increasing home prices across the country. During this time period home prices rose nearly fifty percent (Li, 2015). Comparatively, from
Moreover, the foreclosure rate varied from only 1.58% on prime loans to an outstanding 12.55% on subprime mortgage loans (Subprime Mortgage,
2016). Due to the collapse in the housing market, foreclosures caused an estimated $71 billion in losses at the end of 2007, as well as, another $32
billion is losses to properties neighboring the foreclosures (Li & Li, 2012). Consequently, investors began to see the risk associated with mortgage
backed securities and began purchasing safer investment. The housing bubble burst had a profound effect on financial institutions involved in the
securitization of subprime mortgages and as such was the tipping point to the financial crisis.
Effect of Lenders, investment banks, and investors Since, those involved in the subprime mortgage market assumed home prices would continue to
rise, many were unable to foresee the fatal repercussions a crash in the housing market would cause. Once subprime loan delinquencies and
foreclosures increased, some lenders were forced to buy back the bad loans from investment banks negatively impacting their earnings and stock prices
(A Sub–Prime Primer, 2007). Furthermore, the value of mortgage back securities dropped substantially and combined with fewer buyers, investment
banks experienced enormous losses on their security holdings, which they were forced to record. In

The Recession Of The United States ( Us ) With The...
INTRODUCTION
The early beginning of the 21st century had marked the history of the United States (US) with the Subprime mortgage crisis. In fact, it started when the
traditional model used by the bank to finance mortgages lending trough customer deposits moved to a new model in which they were selling the
mortgages to the bond markets through new kind of investment vehicles . This method made it easier to find borrowers because banks were no more
limited by a maximum amount of mortgage lending . The increasing demand fuelled the rise of housing prices, so homeowners tried to take advantage
of it by tacking out second mortgage with lower interest rates against their added value . In 2006, the unexpected burst of US housing prices bubble ...
Show more content on Helpwriting.net ...
SECURITIZATIONAND STRUCTURED PRODUCTS
New lending strategies involving structured finance and securitization contributed widely to the meltdown of Subprime mortgages market. Under this
system, banks were able to make mortgage loans that were pooled together as a mortgage–backed security (MBSs) and, then, sold into securities to
investors . Moreover, in some more complex securitization, namely the collateralized debt obligation (CDOs), the mortgage originators were sold to a
single purpose company acting as a special purpose vehicle (SPV), who combined them with other debt instrument that were issued by special
investment vehicle (SIVs).
After the creation of this structured product, the SPV was entitled in the interest from the pool of bank loans. However, since the SPV's shares are
held by someone else that the originator, the SPV incomes doesn't appear as part of the bank consolidate account . Thus, to repay the bank originators,
SPV divided the cash flows from CDOs or MBSs securities into segments, called tranches, with different repayment and return conditions according to
investors' appetite for risk . As it will be in the next section, the CRAs have played an important role in the favourable rating of these segments.
CRAs RATING SYTEM
The main role of CRAs are to reduce the information asymmetries about the financial markets by providing independent ratings based on an

Us Subprime Mortgage Crisis Essay
The Global Economic Environment
EMBA 683 – Fall 2011
Case: U.S. Subprime Mortgage Crisis – Policy Reactions
1) What are the causes behind the U.S. Subprime mortgage crisis? Is one cause more responsible than another?
The first and more important factor that lead to the subprime mortgage crisis was governments creation of Freddie and Fannie. This move by the
government to intercede the private financial industry sector eventually lead to the US government being the largest lender of mortgages in the US. In
addition to the flawed notion that government should determine who and how a borrow qualifies for mortgage loan is disconcerting in and of itself, but
this also marked a fundamental change in banks models of originate and hold ... Show more content on Helpwriting.net ...
All of the innovated financial instruments mentioned above allowed individuals that would have never been able to qualify for a mortgage in the
past to enter the market. This surge of new home buyers into the market created a spiraling effect that now leaves are market in an excess supply of
homes, and a failed mortgage system that was created and still subsidized by the tax payers as we continue to bailout Freddie and Fannie.
2) What has the Fed done with regard to monetary policy to address the economic downturn resulting from the subprime crisis? What is your
assessment of how Ben Bernake has handled the situation?
The Fed implemented several strategies in an attempt to stabilize the economy by first targeting the struggling Financial Industry. The first move by
Bernake was to reduce the target funds rate to 0–0.25% in an attempt to provide liquidity to the banks that needed it. Benake also increased government
spending by building up their balance sheet with the assets that were currently frozen in the capital markets, such as mortgage backed securities. The
Fed believed that by purchasing these assets from the banks it will remove the assets from the banks but also recreate a market for these type of
financial instruments, which would ultimately help the housing industry as well. To help illustrate Benake's monetary policy philosophy and actions
are best summarized by the following quote, "people know that inflation erodes the real

John Duca Subprime Mortgage Crisis
Most students and professionals will likely be asked to find and utilize a source of information at least once. The information that is available to
people is countless however, not all sources of that information have the same value. A few things that make a source reliable and usable when one is
writing are evidence to support statements, a good structure that can be read and understood with ease, and lastly it should be current with when it is
being used.
"Subprime Mortgage Crisis" by John V. Duca, provides a detailed explanation of the reasons behind themortgage crisis, that occurred between the
2007 and 2010, along with the procedures taken to alleviate said crisis. The online article demonstrates various qualities that make it a reliable source.
The writer of "Subprime Mortgage Crisis" reinforces his statements with other sources of information, is ... Show more content on Helpwriting.net ...
The article "Subprime Mortgage Crisis" was written on November 22, 2013. Since the event being discussed in the topic are fairly recent, a source
written during or immediately after the mortgage crisis might not provide an evaluated explanation of the incident in its entirety, and instead it could
explain was the crisis like for the people that lived it. The article was written three years after the occurrence and nearly four years before today. The
amount of time that elapsed between the event, the writing, and current day is sufficient to make this source have both a complete scope of the topic
and the quality of being current.
"What Caused the Mortgage Crisis?" gives the reader a general and personalized view on the mortgage crisis. In the article "What Caused the
Mortgage Crisis?" the author lacks a few things which make his paper an unreliable source. "What Caused the Mortgage Crisis?" shows no support for
each of his statements and kind of just uses a narrative writing style, lacks structure, and

Lehman Brothers And The Subprime Mortgage Crisis Essay
On September 15th, 2008, Lehman Brothers filed for Chapter 11 Bankruptcy, the largest filing for bankruptcy in the history of the United States
(U.S.). During this time, Lehman Brothers was the fourth largest investment firm in the U.S. It declared $639 billion in assets and $613 billion in
debts (Wiggins, Piontek, & Metrick, 2014). They had come a long way from a general store in Alabama back in the 1800's. This company's downfall
can mostly be blamed on the subprime mortgage crisis of 2007/2008, surely there are many other reasons though. The U.S. government did not employ
any bailout tactics for Lehman Brothers like it did for J.P. Morgan Chase. The government did let some other firms go bankrupt, but their biggest
mistake was leaving Lehman Brothers out to dry. Their downfall had a much worse impact on the economy. It is estimated that this crisis cost the U.S.
economy (based on lost output) (goods and services not yet produced) anywhere from a couple trillion to $10 trillion dollars (Wiggins et al., 2014).
This is despite the vigorous efforts of the U.S. government and governments from around the world to stabilize and maintain their economies.
Lehman Brothers originally started out as a general store. In 1844, Henry Lehman started the business and eventually his two brothers, Emanuel and
Mayer, joined in. What started off as selling supplies to cotton farmers quickly turned to a commodities broker company. After the Civil War, Lehman
Brothers helped form and head the

The Financial Crisis Of Lehmann Brothers
The 2008 financial crisis, also known as the U.S. Subprime Mortgage crisis, is considered by many economists to be the most perilous crisis faced by
the modern day world economy since the 1930s Great Depression (Krugman, 2009). The collapse of Lehmann brothers, one of the world's leading
investment banks before declaring bankruptcy, in September 2008 almost took down the world's financial system. Many factors such as U.S. Home
ownership policies, consequential securitisation, irresponsible lending by banks, deregulations of banks were pointed out as major contributing factors
that precipitated the financial crisis. The 2008 financial crisis eventually resulted in an inevitable global economic meltdown despite aggressive bailout
efforts by... Show more content on Helpwriting.net ...
Banks and financial institutions aggregate and compile similar loans such as mortgages and place them into a fund. These loans will subsequently be
issued as securities, such as mortgaged–back securities, that are tied to the fund's assets to investors, which can also be known as collateralized debt
obligations (CDO) (Choudhry and Baig, 2013). CDO, which initially began with corporate forms of debts, were highly favoured by banks as the
process of securitisation and selling on would allow more capital to be freed up to facilitate more future lending (Lanchester, 2010). Securitisation first
emerged during the 1980s as investment banks attempt to turn the loans on their books into bonds and sell the bonds into the institutional investor
market. The process usually involves the setting up of a new company, known as Special Purpose Vehicle (SPV), by the bank, which will be typically
based in a tax haven, and the bank will subsequently sell its loans to the SPV. The SPV then repackages the loans into interest–bearing tradable
securities and issue it to investors. Revenues received will be later on passed through to the bank as the purchase price for the loans. The interest the
bank receives on these loans it passes back to the SPV to pay the investors (Choudhry and Baig, 2013). Earliest securitisations take form in
mortgaged–back securities with the idea that the last thing people

Theu.s. Housing Market And The U.s. Financial Crisis
The credit crunch, which occurred in the U.S. housing market between 2007 and 2009, led to the biggest global financial crisis. The impact of this
crisis extended over the world, and the economies of many countries were damaged. Kawai stated that: 'The ongoing global crisis has had a profound
impact on the Asia and Pacific region, particularly on its exports.' (2009:1)
There were a lot of factors which brought about the crisis. Due to limited space, this essay will look at the U.S. housing market and the U.S. financial
system, and discuss the increasing demand of the subprime market as the most important factor bringing about this crisis.
There are three parts in this essay. The first part of this essay will focus on the causes of the... Show more content on Helpwriting.net ...
According to Marshall (2009), the dramatic increase of house price in the US was more than double from 1998 to the end of 2005, and the rising
house prices were the result of large increase in demand. Increasing demand in houses caused the housing bubble.
There were three causes which supported subprime market and the creation of the bubble.
The first cause of the housing bubble is low interest rates which resulted from inflow of large amount of foreign money since investors from other
countries believe that investment in the U.S. provided low risk and good returns for them.
Holt illustrated that: 'Mortgage interest rates were falling despite the low savings rate in the U.S. because of an influx of saving entering the U.S. from
other countries' (2009:121)
The Federal Reserve preserved low interest rates policy in order to stimulate economic growth. The interest rates of mortgage market were kept low
therefore demand of mortgage lending market went up rapidly. Moreover, mortgage agencies made low short term interest rates for example adjustable
rate mortgages (ARMs) to encourage house buyer and investment with borrow money. The low interest rates encouraged more people to borrow
money in financial market that led to excessive demand in the market and the housing bubble.
The second cause of housing bubble

The Subprime Mortgage Crisis Devastated From The Global...
Writing Assignment #2
Financial Market
Yuxue Zhang
The 2008 subprime mortgage crisis devastated from the global financial market. People believed that the "Big Three" credit rating agencies played a
significant role at various stages in the crisis. The Reuters, in an article published in 2011, even claimed that credit rating agencies triggered the
financial crisis. The Reuters believed that Moody's Corp and Standard and Poor triggered the worst financial crisis in decades by downgrading the
rating on complex mortgages securities triggered the worst financial crisis in decades. However, the problems of rating agencies have existed for
quite a long time and accelerated the crash down in some extend. In my opinion, despite the significance of the "trigger", the credit rating agencies
served as the "catalyst" for the crisis by inducing the investor to enter under–served markets. First, there is too much trust and investors are over
confident about the rating from the "Big Three". Rating agencies are remarkably profitable businesses, and they exhibit exceptional influential in the
global financial market. As the global capital market grows rapidly, investors seek trustworthy and standardized tool to help their investment decisions.
Therefore, when Moody first introduced the rating system in his "Moody's Analyses Railroad Investment", the system gained recognition quickly and
became popular to investors. When problems of credit risk quickly escalated as financial market grew,

The Causes And Effects Of The Subprime Crisis
Subprime crisis has grabbed public's attention when a significant rise in home foreclosures in 2006 seemingly out of control in 2007 and
eventually the collapse of lending industries and hedge funds has occurred. Subprime crisis is defined as a situation whereby borrowers being
approved for loans they could not afford for repayment which affecting the mortgage industry. Fair value accounting has been in the center of
criticism in this financial earthquake. It is blamed as main cause of Subprime crisis and led to a financial meltdown. Instead of blaming fair value
accounting, in my opinion there are some possible causes of the crisis can be identified and to be debated upon. First and foremost, most of the blame
can be pointed at the lenders who lent money to the poor credit and high default risk borrowers. Due to the easy availability of the subprime credit,
there was an... Show more content on Helpwriting.net ...
At this point, subprime lending allows the borrowers to be able to make purchases for houses through housing loan on easy terms and conditions, which
in turn enhanced the home ownership in the bubble year. This is in line with the conclusion of Whalen (2008). According to Whalen (2008), the odious
partnership of home building, banks, real estate companies, and GSEs which was formed to support affordable housing was the main cause of the
subprime credit crisis.
The housing bubble was also considered as one of the causes of the subprime crisis. A housing bubble is caused by tremendous increases in the real
property valuation until reaching unsustainable levels relative to incomes and other affordability indexes. The perception of generations of consumers
believed that not only would the values of home not decline, but that the home values will continue to rise in the future.

U.S. Subprime Mortgage Crisis Essay

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