The Crisis Of The Housing Boom

1156 Words Dec 3rd, 2015 5 Pages
This was a big problem because the housing boom became an economic bubble. An Economic bubble is when a demand gets very high is the price inflates to the point where it is not sustainable and tends to burst as it gets too big. This is exactly what had happened. People wanted to buy expensive houses that they couldn’t afford. The money came from other countries so that getting good credit was easy and with that credit, they took out loans to buy the houses. This is called Sub-prime Mortgages. There are three types of mortgages. A Prime mortgage, which is issued to a person who has a solid credit history and a high likelihood of repayment, A Alternative A-Paper mortgage, which is a mortgage issued to a person with good credit, but without full documentation of income. Lastly, the one that the Lehman brothers use was The Subprime mortgage, which is a mortgage issued to a borrower without a solid credit history or with bad credit and also who lacks full documentation of income. But what caused this Housing market threat? The Subprime mortgages, It starts off with greedy mortgage dealers who set the terms that are unfair to the people who want to get the mortgage loan. These people were often families who were not even qualified for an ordinary home loan.These subprime mortgages offered low interest rate in the beginning, but that would increase to double digit rates in later years. This was called teasers. The mortgage terms that would be included would be the prepayment…
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