The recent mortgage crisis in America impacted money supply in many ways. Banks started to stop their lending habits even to the genuine customers. As a result of that, economic activities have been reduced considerably in America. …
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One of the major reasons of the recent financial crisis in United Sates was the mortgage crisis. Mortgage crisis refers to a situation in which the money borrowers fail to repay the money they lent from financial institutions. American financial institutions miscalculated that American economy is strong enough to overcome any kind of crisis situation and it is not necessary to bother much about the repaying capacities of the people who approach them for loans and other financial aids. Greedy public exploited the opportunities very well and they approached American banks for financial aids to purchase lavish apartments, real estate properties, vehicles etc. American banks imposed no restrictions in mortgage sanctioning and dispersed huge amount of money for maximising their profits. In most of the other countries, mortgages are sanctioned only after the assessment of the financial abilities of the customer. But in America, banks have shown fewer interests in assessing the abilities of the customers. The unexpected mortgage crisis impacted heavily on the money supply in America and Federal Reserve forced to take strong measures to counter the mortgage crisis. Impacts of the recent mortgage crisis on the money supply in the United States The major impact of the recent mortgage crisis on money supply in America was the change in behaviours of the investors....
driven some analysts to argue that should the monetary policy response fail to restore confidence among investors, the outcome would be the worst crisis seen since the Great Depression” (The United States Subprime Mortgage Crisis And Its Implications For The Caribbean, 2008, p.1). Real estate sector was the worst affected industry as a result of the recent mortgage crisis and subsequent money supply problems. Majority of the real estate business groups rely heavily on mortgages from financial institutions for the completion of their projects. As a result of the reluctance of the investors in investing in banks, Banks started to find money shortages to assist the real estate sector. Banks started to impose strict norms for sanctioning mortgages to real estate people. Moreover, people who approached banks for financial aids for purchasing properties were told that no more mortgages were possible without adequate proof about their financial abilities. Thus, both the real estate business groups and the people who liked to purchase some properties suffered heavily and as a result of that real estate business started collapse. The impacts of mortgage crisis have not been limited to the financial sector alone. In fact, it has spilled into the real economy also and as result of that American economic growth has been reduced considerably over the last four years period. Economic activities in America have been reduced considerably because of the shortage of money in the hands of the public. Moreover, Americans started realise the importance of saving money for future crisis situations as they learned a lesson from the recent crisis. Thus, Americans started to cut down their lavish spending habits because of the mortgage crisis and subsequent recession problems. According to
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These rates were then converted into effective annual rates. Lender 15 YR EAR 30 YR EAR Bank of America 3.500 3.905% 4.250 4.505% Lending Tree 2.75 2.97% 3.63 3.75% GMAC 3.250 3.555% 4.0 4.121% Chase Bank 3.625 3.789% 4.375 4.492% AmeriSave 2.750 2.991% 3.250 3.505% There are number of common mistakes individuals make when looking at quoted mortgage rates and shopping for mortgage rates.
898). Various explanations as to the root causes of the crisis have been given, essentially blaming it either on market failure (i.e. corporate mismanagement, Wall Street’s risky undertakings, and banks’ fraudulent practices and toxic instruments) or government failure (i.e.
Europe was the first place to receive the impact of subprime mortgage crisis, but the effect spread in the rest of world afterwards. Justin and Boris (2011) indicate that the East Asia would not resist the impact that was affecting most of a global economy.
While mortgage and house markets downtowns have been causes of economic problems in various parts of the world, but experts assert that this situation is unique (Simkovic 257). This study reveals that, the uniqueness of their situation explains for the first time ever downturns are motivated by a credit crisis in the non-banking area of finance, which is contrary from the norm, whereby such actions have created downturns in the general economy through a credit crisis in the banking zone.
Economic indicators based on actual data or leading indicators are used by the Federal Reserve in firming up its monetary policies. In order to achieve its objectives, Federal Reserve controls money supply directly in the economy through supply of Federal Reserve balances and indirectly by controlling the interest rates.
The current deceleration in housing trade, inferior house costs and the retuning of mortgage variable rates has initiated a downturn in the mortgage sector. The predicaments are principally manifested in the "sub-prime" sector and are imitated in swiftly growing delinquency, non-payment and foreclosure rates.
Its obligations have grown through the years, and presently, as per the documentation of the Federal Reserve, it conducts the country’s financial strategy, overseeing and
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