Sub-prime crisis

Meaning of sub-prime

by R. Venkata Subramani

Sub-prime lending extends credit to people who do not have access to the regular credit market. It could take the following forms: Loans to borrowers who have an existing history of loan delinquency or default Loans to borrowers already bankrupt Loans that do not meet guidelines stipulated by Fannie Mae or Freddie Mac Loans based [...]

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Sub-prime mortgage loans – Seed to the crisis

by R. Venkata Subramani

More and more loans were given to higher-risk borrowers to benefit out of the booming market.  The spread between prime and sub-prime mortgage interest rates came down drastically from 2.8% in 2001 to 1.3% in 2007 to induce the borrower thereby compensating on the risk premium. The risk premium was compensated in-spite of the decline [...]

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Background of sub-prime

by R. Venkata Subramani

Sub-prime mortgages formed a major portion of the overall mortgage market being estimated at $1.3 trillion as of March 2007. These mortgages had little or no upfront payment was made and issued to low/minority income/assets groups with low credit profiles. In third quarter of 2007, sub-prime ARM’s amounting to 7% of overall mortgages outstanding in [...]

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Meaning of sub-prime mortgage crisis

by R. Venkata Subramani

The term “Sub-prime Mortgage Crisis” refers to the current financial crisis which was primarily triggered by increasing delinquencies and foreclosures in mortgage loans in US and hence affecting major banks and financial markets around the globe adversely. The last time the world faced such a situation was after the stock market crash in October 1929. It took three [...]

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