The Housing Crisis - G CRISIS HOW WHY Abraham Dweck...

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2008 Abraham Dweck BE/BF304 12/10/2008
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Abraham Dweck 12/10/08 Prof. Holland BE/BF 304 The Housing Crisis: How and Why In the past couple of years we have seen the real estate market drop to unforeseen lows. What once was the place to invest is now the place to run and hide from. Just how did we go from such a high to this low in a market that was the back-bone of American society. The answer lies with the banks and even with the American dream that every person can own a home. Sadly, the American dream became something that was a necessity and not just a dream, which led to people who should have been paying rent instead of defaulting on mortgages. Sub-prime mortgages came to life under the Clinton administration as he believed that every American should have the opportunity to own a home. This loosened the belt on the strict mortgages that we only given to people with good credit and those who were financially secure. Once the bill was passes it allowed Americans to borrow $407K for a house on an adjusted rate mortgage or ARM. An adjusted rate mortgage is a loan with the house as collateral where the interest you pay on the loan varies from year to year. The rate can depend on the LIBOR rate, the rate at which T-bills are traded etc… This plan seemed to be perfect as even if someone could not make the monthly payment they could refinance their home at its new price and by the time they got a new job they could resume making the payments. The plan had only one flaw, and that
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The Housing Crisis - G CRISIS HOW WHY Abraham Dweck...

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