TALLER

The Subprime Mortgage Crisis

Elaborate by: Valeria Alexandra Rubio Rubiano

1. Find 2 main causes that led to the crisis

 The rise in subprime lending

 The increase in housing speculation

Subprime mortgages were made available to lenders who financed the mortgages by repackaging
them into pools that were sold to investors. New financial products were used to spread these
risks, with mortgage-backed securities (MBSes) providing most of the subprime financing. The
expansion of mortgages to subprime borrowers contributed to rising home prices. As housing
prices peaked, mortgage refinancing and home sales became less viable means of paying off
mortgage debt, and mortgage loss rates began to rise for lenders and investors, which led to a
drop in home prices. Prices fell so much that it became difficult for troubled borrowers to sell their
homes to fully pay off their mortgages. These causes led to a period of turbulence in the financial
markets that lasted from 2007 to 2010

2. What happened to some banks in the U.S has a result?

In The United States 15 banks failed in 2008 while several others were rescued through
government intervention or acquisitions by other banks

3. What alternatives did the governments take in order to solve the crisis?

During the subprime mortgage crisis, governments around the world implemented a number of
measures to address the issue. Some of these measures included:

 Providing liquidity support to financial institutions that were struggling due to losses in the
subprime mortgage market.

 Implementing new regulations and oversight measures to prevent similar crises from
occurring in the future.

 Instituting plans to stimulate economic growth in order to help jumpstart the economy
and reduce the impact of the crisis.

 Offering financial assistance to homeowners who were struggling to repay their

mortgages, and in some cases, offering foreclosure prevention programs and mortgage
loan modifications.