Week 1 Discussion Post - Week 1 Discussion What lessons can...

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Week 1 Discussion What lessons can be learned from the subprime mortgage meltdown? The subprime mortgage meltdown is the worst financial crisis in our lives. We were living life believing that home prices could never go down. According to Treasury secretary Hank Paulson, “We looked at the data since 1945, and we concluded that house prices don’t go down.” [Bre13]Wall Street predictions should be ignored. What we have all seen with events such as the subprime meltdown things can and will change. The second thing we can learn from the subprime mortgage is that debt can be dangerous. During the subprime meltdown there was lots of “bad paper” written. People who did not qualify for loans were given loans with payments they could not afford. Furthermore, there were many loans written for interest only payments. However, as we saw, when home prices plummet, interest only loans were a catalyst for the failure of many lenders. When debt climbs dramatically, it puts the lender and the borrower in a bad predicament.

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