The Mortgage Crisi- Cause and Effect

Topics: Subprime mortgage crisis, Subprime lending, Debt Pages: 4 (1178 words) Published: October 4, 2011
The 21st Century Mortgage Crisis
January 22, 2011

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 the pieces. The mortgage meltdown surfaced in mid 2006 and exploded in 2007, leaving millions of Americans without homes, over extended, and asking the questions how and why. The how and why can start with the hap-hazards lending practices of subprime lenders. Subprime lending coupled with Wall Street’s greediness is the catalyst to the current mortgage crisis. The crisis is a symptom of capitalism failure that has influence the undermining of the country’s financial structure which is pushing America into an era of uncertainty and reform. From 2000-2005 the housing /mortgage industry increased rapidly. A housing bubble is an increase in housing prices based on demand and the concept that home owners and potential investors can make a profit through short buying and selling. According to Bianca (2008) a housing bubble is defined by rapid increases in the valuations of real property until unsustainable levels are reached in relation to incomes and other indicators of affordability. Unfortunately, a housing bubble isn’t usually defined until after there is a rapid decline. One contributing symptom to the mortgage crisis was the decline in interest rates. After the collapse of the and the terror attacks of September...

References: Bianco, K. (2008).The Subprime Lending Crisis: Causes and Effects of the Mortgage Meltdown. Retrieved from
Foster, J, & Magdoff, F
Muolo, P. (2008).US sub-prime bubble finally bursts. Mortgage Strategy, 28. Retrieved from EBSCOhost.
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