The Negative Effects Of Sub Prime Mortgages Essay

1539 Words Dec 13th, 2016 7 Pages
A few weeks ago, the media began to report frequently about the negative effects of sub prime mortgages. When we had the stock market sell off in late February to early March, the media was applying it to largely the sub prime mortgage crisis. Now, you are receiving from some analysts that it won 't be that bad because of the insignificant amount of sub prime lenders that make up the mortgage industry. However, it has been reported that approximately ten percent of the total mortgages are sub prime. So what are we to believe? First, real estate prices are based on regional location. You want to focus on your local real estate to consider an exact gauge of the significant impact. That said, even though it might not be a huge amount of the total mortgage loans, it still will be a major player in the real estate inventory which has been continuously increasing since late 2005. Sub prime loans allowed many people with poor credit to buy in that housing boom we just experienced. The same people were enticed with very low teaser rates. The worst kind was done with interest only ARM loans. It allowed someone to buy a home that under common underwriting guidelines; they couldn 't afford due to their poor credit history. These lenders targeted vulnerable borrowers. Most people signed paperwork without understanding what they were signing. They just saw the opportunity to get a home with lenient guidelines and acted upon it. The serious part is they did it on a short term basis.…

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