SUBPRIME MORTGAGE LOANS Nwo&feature=related.

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Presentation transcript:

SUBPRIME MORTGAGE LOANS 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 rate in the beginning that changes later.

WHY IS THIS A CRISIS?

RISK V. BENEFIT Variable Interest Rates Possibility of foreclosure Low fixed rate to begin with People with less than perfect credit can buy houses BORROWER * High default percentages! * Potential profit LENDER

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