Subprime Lending Thesis

Because the default rate is much higher, banks would charge a lot more for people in this high risk group.That will mean people who could not qualify for a home loan ended up paying more for their mortgage.While some high-risk families could obtain small-sized mortgages backed by the Federal Housing Administration (FHA), others, facing limited credit options, rented.

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Because such periods of rising home prices and expanded mortgage availability were relatively unprecedented, and new mortgage products’ longer-run sustainability was untested, the riskiness of PMBS may not have been well-understood.

On a practical level, risk was “off the radar screen” because many gauges of mortgage loan quality available at the time were based on prime, rather than new, mortgage products.

Should we blame banking institutions, mortgage lenders, brokers, and investors for this crisis?

Should minorities be blamed for recklessly accepting loans and defaulting on them after realizing they could not meet their obligation?

These loans were provided to people with poor credit or no credit from poor neighborhood, and minorities groups.

Subprime Lending Thesis Law Research Proposal

Specially targeted were the African-American and Hispanics groups.

Due to this mortgage crisis, the housing market subsequently has crumbled resulting in a record numbers of home foreclosure and more are still looming in the horizon. Stiglitz, a professor at Columbia University points out the causes proposed include the inability of homeowners to make their mortgage payments, due primarily to adjustable-rate mortgages resetting, borrowers overextending, predatory lending, speculation and overbuilding during the boom period, risky mortgage products, high personal and corporate debt levels, financial products that distributed and perhaps concealed the risk of mortgage default, bad monetary and housing policies, international trade imbalances, and inappropriate government regulation, (Stiglitz, 2008).

For many, the dream of home ownership has become a real nightmare. Subprime mortgages loans were those attractively packaged and offered to people who normally did not qualify to get an ordinary loan.

Also, it will be dispensable to look at what has really prompted the housing collapse.

The subprime mortgage crisis The argument over who is at fault for the housing market collapse has been a heated issue amongst government, politicians, banking institutions, and mortgage lenders.


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