2008 Financial Crisis Research Paper

Housing and Mortgage Markets
Financial Crisis, 2008-2009
For generations, the American dream for many people has been to have their own house. Homeownership has been an important symbol of wealth for American through all history. The mortgage market had given the opportunity to many families to fulfill their dreams, which then became a nightmare.“Indeed, the homeownership rate reached a record high of 69.2 percent in the second quarter of 2004.”(Barth, Li, Lu, Phumiwasana, and Yago).Individuals considered to be less credit worthy to buy a house were provided with more opportunities to purchase a house, which contributed to the growth of the subprime mortgages. Those individuals were in accordance with the bankers and did not have the intention …show more content…
This left mortgages lender with property that was worth less than the loan value due to the run-down of the housing market. Created payments started to increase and several lenders went in bankrupt. Lenders sold mortgages originated in the secondary market, and this affected the inventors and the coverage funs. Then the mortgages were incorporated together and sold to investors as collaterlized debt agreement and the mortgage- backed securities. When the underlying subprime mortgage defaults began, investors were left with properties that were losing value very rapidly. In the awakening of the meltdown, central banks allowed struggling lenders and hedge funds to continue operations and make the necessary payments on their obligations. The graph figure 6, found in the book The Rise and Fall of the U.S. Mortgage, shows the declining value of houses during 1988- 2008, and graph figure 4, by Todd J. Zywicki and Gabriel Okloski, illustrate foreclosure start rates by yearly average over the past several …show more content…
The United Sates residential real- estate market collapsed, resulting in chaos in the banking industry. In fact, the U.S economy has suffered an ongoing global crisis. Countless numbers of families were in crisis and found themselves owning more than their home’s value
Economist Anna J Schwatz wrote about three most significant lessons that we have to pay attention to avoid a financial crisis like the one in 2008. First she mentioned that the housing market industry should not lower the interest rates to a level that makes borrowing appear riskless. Besides, she suggested to be wary of untested financial innovation like mortgage- backed securities, and avoid fundamentally flawed instruments like the pre-credit crisis market for auction- rate securities, which appeared long- term to the borrower but short-term to the

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