SUBPRIME MORTGAGE LOANS http://www.youtube.com/watch?v=q8hjUei-Nwo&feature=related
What is a subprime mortgage loan? A subprime mortgage loan is a type of loan that is given to an individual with less than perfect credit. Lenders lure in these types of borrowers by offering a low fixed interest ratein the beginning that changes later.
RISK V. BENEFIT BORROWER • Variable Interest Rates • Possibility of foreclosure • Low fixed rate to begin with • People with less than perfect credit can buy houses LENDER * Potential profit * High default percentages!
CREDIT CYCLE Borrowers and lenders put themselves into debt and then overcompensate trying to fix things Ultimately finding no balance only the two extremes.
MAJOR CAUSES: • Human Race • Public Policy • Wall Street
EFFECTS: • Housing Market Downwards Spiral • Federal Intervention • Economic Recession