The U.S. Subprime Mortgage Crisis 2007

The U.S. Subprime Mortgage Crisis 2007

  • Submitted By: alvit92
  • Date Submitted: 11/30/2013 6:31 AM
  • Category: Business
  • Words: 3579
  • Page: 15
  • Views: 5


Current economic situation is considered to be called post-crisis. Today we may see the unsteady growth on the goods markets, unexpected downfalls on the stock exchange, commodities and raw materials prices instability and other consequences of the Global Financial Crisis. Thus, this problem is extremely relevant nowadays.
But these are just the effect, so it is an issue of great importance to know the objective reasons for all these occurrences.
The U.S. subprime mortgage crisis was one of these reasons and first indicator of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by above-mentioned mortgages.
Therefore, the aim of this course paper is to find the real cause of the U.S. subprime mortgage crisis and to compare it with the reasons of the Global Financial Crisis.
In the network of this aim there are a number of objectives:
1. Discovering the causes of the mortgage crisis 2007 and pointing out the main one;
2. Characterizing the situation emerging on the eve of the crisis;
3. Analyzing the impacts the crisis has on the U.S. market and outside its country of origin;
4. Assessing the measures taking up by the banks and financial institutions.

1 Background and timeline of events

The immediate cause of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006. High default rates on "subprime" and adjustable rate mortgages (ARM) began to increase quickly thereafter. Lenders began originating large numbers of high risk mortgages from around 2004 to 2007, and loans from those vintage years exhibited higher default rates than loans made either before or after. An increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages...

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