Subprime Mortgage Crisis
It is a frightening thing when you work at a mortgage company and look up to see the majority of your fellow co-workers walking by you with their belongings in their hand after they have just been laid off. It is even more frightening when you realize that this was something that was occurring at mortgage companies all over. And so began the mortgage crisis. I never fully understood what the cause was for what was happening. The primary resource report Subprime Mortgage Crisis explains perfectly how the economy ended up in such turmoil.
This report discusses how the housing bubble created by the subprime mortgage borrowers lead to the major economic crisis that is still hindering the economy today. Between the years of 2004-2006, mortgage companies began handing out mortgages to people who clearly could not afford them, resulting in what is known as the “housing bubble”. The problem with these mortgages was that for the first 2 years of what is typically a 30 year mortgage, borrowers had a low fixed interest rate. After the 2 years was over, the interest rose tremendously thus creating payments that the subprime borrowers could not afford. As a result, a massive amount of foreclosures followed. This resulted in mortgage companies and credit card companies becoming leery of extending a loan to subprime borrowers. Many of the foreclosed homes have remained vacant causing the value of surrounding homes in the neighborhood to decrease. There is a house that is “kiddie corner” to mine that is on the outer edge of our street. “In 2008, the family who was living in the house decided that they couldn’t afford their payments anymore and abandoned the home. Since that time the house has sat vacant and not maintained. Because you can clearly see no one is living there, people have broken into the house and vandalized it. This is the first house that you see when you turn onto the block. To the unknown, this gives the impression that our…

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