Question

After reading Special Topic 5, write a 2-page paper answering the following: Why did housing prices rise rapidly during 2002 - 2005? Why did the mortgage default rate increase so sharply during 2006 and 2007 even before the 2008 - 2009 recession began? What did the Community Reinvestment Act have to do with the housing bubble and collapse? Cite your sources as needed. Use APA formatting. View your assignment rubric.

Answer 1

Generally, housing price rises steadily in the period 2002-2005 as the demand for the new houses increased or rises. The default mortgage rate rose so sharply between the 2006 and 2007 as more amount of loans were made with the lower conditions, and also more people were unable to repay the mortgage.

During 1995 to 2005, credit standards were dropped, which affected the home price bubble, as it sparked an increase in the mortgage demand. When owners have little to no equity in their properties, then their risk of defaulting on their mortgageis higher.The position of the Housing bubble crash 2007 Community Reinvestment Act. The fact of the worst financial crisis in the last 80 years had lead to the widespread speculation about it's causes. Crisis of the community reinvestment act (CRA) claims that by forcing banks in order to meet the low-income borrower's credit needs, the legislation has pushed lending institutions to take on the risky loans that have proven the fiscal recklessness.

This was only because the CRA led to the financial crisis. During the quarters leading up to the CRA inspections, the banks raised their aggressive lending by around 5%. Such sort of loans defaulted more often than 15%. Then it would have been more likely in the "greenlined" areas. Big banks had given them more even. Also we have to remind that when private securization was boomed, the analysis showed the results obtained were highest.