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Sub-Prime Home Loan Mortgage

Essay by   •  July 21, 2013  •  Essay  •  261 Words (2 Pages)  •  1,325 Views

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Sub-Prime Home Loan Mortgage

The issue with the sub-prime mortgage financial crisis, which is still being worked on, is the sudden increase in foreclosures in the sub-prime mortgage market. This market began here, in the United States, in 2006 and spread all over the world as a financial crisis in July of 2007. The rising of the interest rates increased the monthly payments on rate mortgages as well. Property values declined too, leaving homeowners unable to meet financial commitments and lenders without a to get their money back.

The sudden rise in foreclosures caused many major sub-prime mortgage lenders to shut down or file for bankruptcy. Some of these lenders were even accused of fraud through means of increasing the income written on the loan applications, hence the downfall of the stock prices of many in the sub-prime mortgage industry and other large lenders.

Many who have seen this decline, as well as even the House have blamed this problem on the "lack of effective government oversight." It has also been said that the mortgage brokers were showing borrowers unaffordable loans. Lenders offered the borrowers programs as to how they could pay them back, with risks that the borrowers would agree to without the lenders even looking into if it would actually be affordable to them. People who tried to borrow money also have been caught with increasing their amount of income on their loan applications and agreeing to loan programs they would not be able to afford. Discrimination on the race of the borrowers was also found.



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