Factors Affecting The Mortgage Crisis Essay

808 Words Dec 15th, 2015 4 Pages
In 2008, there was a mortgage crisis which had occurred by a series of misguided and unfortunate circumstances, culminating in a recession which had triggered for the worst financial meltdown since the Great Depression. The United States had experienced an 87% increase in average home prices between January 2002 and mid-2006, the mortgage market eventually declined and the housing boom began to subside. Sadly, the boom soon became a major bust, and by the end of 2008, housing prices were about 25 percent below the peak level achieved in 2006. As a result of the crisis, capital and liquidity disappeared from the market. There are multiple factors that contributed to the mortgage crisis. These factors included weak underwriting standards, relaxed regulatory oversight, introduction and endorsement of risky products, and deficient compliance enforcement. Credit underwriting standards were not effective as fewer guidelines permitted people who wanted to borrow money and would not qualify in stricter underwriting situation to acquire loan approvals. Loans that were given by non agency increased massively and most mortgages were delivered to the market through unregulated private capital which at the time did not require underwriting quality restrictions. This is where the crisis began and the richer got richer and poor got poorer. In addition to all the laid back underwriting standards, the market substantially experienced an increase in new, non-traditional mortgage products.…

Related Documents