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Subprime Mortgage Crisis - Research Paper Example
Author : rogahndolly
Finance & Accounting
Pages 7 (1757 words)
Name Tutor Course Date LITERATURE REVIEW The unique situation Numerous experts believed that the crisis would have been controlled within the platform of mortgage issuers who had clogged on the subprime loans. In fact, majority of experts never thought that the subprime fallout would be so severe to an extent of threatening the economy…
These numerous theories, which have come up to explain the root cause of the subprime crisis. Numerous experts and economists believe that a combination of factors resulted to the crisis (Lynnley 13). This study intends to examine the housing bubble as a major cause of the subprime crisis. Housing Bubble This study reveals that the present mortgage crisis started with the bursting of the U.S. housing bubble, which commenced in early 2001 and ascended to its peak in the year 2005. Essentially, a housing bubble can be defined as an economic bubble whose occurrence in both the local and international platforms in real markets id characterized by almost similar features. The housing bubble is defined by express rise in the valuations of real assets until untenable levels related to income and affiliated affordability indicators are reached (Lynnley 11). This situation leads to the decrease of home prices and debts related to mortgages, which are higher compared to the value of the assets. It is imperative to note that the housing bubble was discovered at the aftermath of the market correction that happened in the U.S in 2006. ...