The Sub-Prime Mortgage Crisis of America

Topics: Subprime mortgage crisis, Mortgage, Subprime lending Pages: 2 (366 words) Published: December 31, 2012
The Subprime Mortgage Crisis

Summary:

Since 2006, American gradually comes into being a crisis called ''sub-prime mortgage crisis''. This crisis becomes more and more serious in the following year, now it is becoming a finance storm that is sweeping over the world like EU, Japan and such main financial markets. The storm had first destroyed the Wall Street and some important global financial Institutions; it also results in the bankruptcies of sub-prime mortgage institutions, the closures of investment funds under compulsion and a big shock of stock market. Moreover, the crisis gradually affects the estimation economy, the realty, the automobile, IT, etc. It leads to more unemployment and less consumer expense.

The concept of mortgages is loads to individuals or business to purchase a home, land, or other real property. The sub-prime 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. The crisis, which has its roots in the closing years of the 20th century, became apparent in 2007 and has exposed pervasive weaknesses in financial industry regulation and the global financial system.

The reasons for the “ sub-prime mortgage crisis” are varied and complex. But the main reason for the crisis is too much debt that people cannot repay the bill back to bank. In other words, there is a very loose regulation and deregulation for people to have a loan. Besides, the direct reasons of the U.S. “ sub-prime mortgage crisis” are the rise in interest rates and the real estate market continued to cool down. When the banks raise the interest rates, it increased the pressure on the repayment. Therefore there will be a lot of bad credit customers hard to repay the bill on bank.

It does not have a big problem for the bank when one or two people cannot pay the bill back. But if more and more borrowers...
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