Understanding The Subprime Mortgage Crisis?
I just have a quick question about the subprime mortgage crisis. From what I have gathered, the subprime mortgage crisis occurred because banks where offering these adjustable mortgages in which, the monthly payments started out low and then, after about 5 years, they were upped to make up the difference. After that 5 year time period, people realized that they couldn’t make the monthly mortgages payments and were forced to foreclose. Was this not a problem before because we didn’t have these types of mortgages or because the lending regimen for these loans got loose? I also read that it was because interest rates fell and house values were growing between 2004-2005 so the incentive to buy a home was high but I’m not sure why the interest rates would fall and why housing values would grow during that time?
I appriciate all your responses and I’ll pick the best answer so be specific!
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