Professor: Wen Hsiu Chou
This project was made by:
The Subprime Mortgage In late 2007, every single person in United State had felt the mortgage crisis as it was visible to even children in high school; the crisis didn’t only affect the United States, it created a panic in the financial market around the world. This is the consequences of giving too much of loan to borrower and damage the financial forming of the country. Having a beautiful house in Miami, is a part from your “America Dream”. However, homes are very expensive which makes almost everyone to borrow money to have one. Subprime mortgages was just a method within the US housing mortgage securities, however when the crisis hit, Subprime mortgage issues were to almost every borrowers in the country and also globally, making both diving into long term debt and a long with a non-lasting story and problems for the financial market. Everyone could have achieved his American dream including a house, until 2000, the mortgage interest rate were low, which made people to borrow more cash, with a very low monthly payment. Additionally, the housing market was increasing dramatically; buying a house at that time was what everyone was doing. Mortgagee (lenders) noticed that the house of course can be valuable collateral, so all investors and lenders participated in giving everyone an approval for a loan. While the prices of individuals were increasing, everyone felt the value of their house to be more and more valuable, year after year. And for those with extra equity, people refinanced a second mortgage just for the sake of getting extra cash in the hand. Banks have also given also a better and easier way to have your cash uphill the crisis hit. People were manipulated in a very high risk mortgages such as the minimum payment option, and surprisingly everyone was approval and everyone was qualified for a loan, and sometime without any documentation.
The Aftermath of the Crisis.
The aftermath of the crisis was enormous and continuous, as the losses were increasing day after day. Subprime mortgage crisis encouraged the foreclosures which had a big segment of the wealthy residential areas, and also left it eventually vacant and in poor shape. The foreclosure process was just a start in melting down the economic. Families have been facing foreclosure and kicked out of their homes ever since, and there isn’t any signal that this might have an ending soon. In 2010, the estimation of the Federal Reserve’s regarding foreclosure cases was 2.31 million. However, 2011, 2012, and 2013 have faced a very similar number, which means the actions taken weren’t enough to fix the problem.
The chart below explains the foreclosure rate through the years:
According to the bookings institution in Washington, D.C Poverty line has also increased tremendously since the crisis took place, and house now closely to a third of the nation’s poor.
The rate of unemployment has been obviously raised as a result of the crisis. In early 2007 the unemployment rate was around 4.6, in late 2007 it increased to 5.1, how every after the crisis starting taking a place in the society, it increased the unemployment rate to 5.8 in 2008 and a huge jump to 9.3 in 2009. However, 2010, 2011 and 2012 had similar numbers as well.
The chart below explains exactly the changes in unemployment rate:
Because of low unemployment, people are not getting any loans approvals very easily, unlike before people could obtain a loan with petty cash as down payment and still get approved; however these days become from the past and are very hard to come back. A recent research indicates the amount of people getting a home loan, and it says: if 10 people have file for a loan, only 1