We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

What Caused the Bubble and Bust in the US Mortgage Market - Term Paper Example

Comments (0)
Even though the magnitude and extent of effects of the collapse of the US mortgage market on the real sector and the economy of other countries is vast, its detrimental effects can be reversed by the use of adequate policies…
Download full paper
What Caused the Bubble and Bust in the US Mortgage Market
Read TextPreview

Extract of sample
What Caused the Bubble and Bust in the US Mortgage Market

Download file to see previous pages... Introduction In the year of 2007, the world witnessed an economic crisis of a magnitude unimaginable in today’s sophisticated times withal its detailed planning, theories and innovations. Some compared it to the Great Depression of 1930s. It began with the crashing of the US Mortgage Market that is one of the most active sectors in the US economy. Gradually, it spread to the financial of many other countries and in 2008 one of the biggest investment banks in UK, the Lehman Brothers, crashed. Though the crisis affected the financial sector resulting in problems pertaining to banking, it soon got transmitted to the real sector through a fall in employment and output. The ultimate effect was an economic slowdown. (Muller, 2010, p.1) In this research, we will analyze the factors that led to the crash of the US Mortgage Market and contributed to a large-scale financial crisis. The US Mortgage Market To identify the factors responsible for the bursting of the bubble in the US Housing sector, its structure and mechanism has to be studied in detail. General structure The US mortgage market has been one of the oldest sectors in the US economy. ...
As a result, of securitization, the banks, now, did not have to wait till the maturity of loans since they have already been bundled and sold off to investors in return for its monetary value. Consequently, lending of credit increased earnings per share increased and the dividend to shareholders and corporate increased as well. Loans were bundled as per the requirement of the investors and sold to the one offering the best rate of interest. Soon, the primary sector banks and S&L were completely driven out from taking part directly in the mortgage market. It was, now, ruled by the secondary sector organizations, investment and mortgage banks. These banks formed a circular system with no lender of last resort like the FED or government bank and S&L. (Kim, 2010, p.139) Mechanism of the Bursting of Bubble in the Housing sector The secondary sector banks engaged in mutual securitization and purchase of one another’s loans. Also, due to lack of regulatory measures in the market, information about borrowers was either not verified or it was foreclosed, in the greed of making more profits and expanding. This resulted in an increase in the number of Non-Performing Assets (NPAs). The effect of each NPA on the mortgage market was magnified due the large number of layers created and it corroded the credit base. Finally, as the negative effect from these NPAs outweighed the overall wealth of these organizations, the entire mortgage market collapsed. Thus, the banks in the financial sector suffered severe losses and people withdrew their money from these banks. In 2007, two hedge funds, the High Grade Structured Credit Strategies Fund and the High Grade Structured Credit Strategies Enhanced ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
Mortgage fraud
According to the research findings some of mortgages schemes that thrive in the economy include property flipping, equity conversion, identity theft, occupancy theft and second residence. As the rates of foreclosure and delinquency keep on soaring, the real estate market will remain sluggish while the mortgage fraud cases will keep increasing.
12 Pages(3000 words)Term Paper
Comparison of market structures of US retail and housing industry
Comparison of market structures of US retail and housing industry Executive summary This study focuses on different market structures and their implications on US retail and housing industry. These industries possess different market structures; retail industry lies in Oligopoly whereas construction industry carries monopolistic competition structure.
16 Pages(4000 words)Term Paper
The prospective for the US to base solar business organization to significantly enter the Indian market
he planet Earth. This has automatically resulted in the creation of needs among various technological companies to look for alternative sources of energy in order to focus on building next generation technological products which will be appealing to the highly aware eco friendly customers.
15 Pages(3750 words)Term Paper
Technology Sector Privite Equity and a New Speculative Bubble
With estimated valuations (from secondary markets) at $76 billion and and $7.7 billion respectively, it is hard to ignore that these private companies have certainly gained investor interest. Most recently Facebook has completed a funding round of $500 million with Goldman Sachs and Digital Sky Technologies.
10 Pages(2500 words)Term Paper
The Housing Market Bubble Burst
The cost of housing or for that matter for any commodity solely depends upon the demand-supply dynamics if it is allowed to operate in a free market without any government intervention. Housing demand was on an upswing since January 1993. The median housing price, which was $125,000 in 1993, doubled up to $250,000 by 2006.
3 Pages(750 words)Research Paper
Impact of the Housing Market on the US GDP
Macro economics consists of concepts that can be applied to the entire world. In economics a financial market is a place which allow buying and selling activities, there are many manufacturers and consumers available in the market. There are many products available of same type hence that raises competition in the market.
8 Pages(2000 words)Term Paper
What Caused the Current Economic Crisis
What caused the current economic crisis? The whole world was taken aback as the slow and destructive financial turmoil unfolded in various parts of the world in late 2007. The credit crunch initiated a long chain of inter-connected events that threatened the existence of financial markets all around the globe.
5 Pages(1250 words)Term Paper
U.S. housing price
U.S. housing price The financial crisis of the United States happened at the backdrop of the US mortgage housing bubble. The homeownership drastically declined for the people belonging to the mainstream workforce. A reduction in the incomes of the individuals and an increase in the rate of poverty were noticed in the country.
8 Pages(2000 words)Term Paper
US airways's new Market - China
US airways's new Market - China Considering the urge of the western countries to establish a strong foothold on the Asian continent in order to expand their aviation industry, US airways invading China seems to be a plausible option. The US Airways is one of the key players in the aviation industry in the US.
11 Pages(2750 words)Term Paper
Technology Sector Privite Equity and a New Speculative Bubble
Goldman intends to resell many of the shares to high net-worth individuals through its wealth management division. This “special investment vehicle” will exploit a loophole in securities law
10 Pages(2500 words)Term Paper
Let us find you another Term Paper on topic What Caused the Bubble and Bust in the US Mortgage Market for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us