Question

1. Define the subprime loan market
2. What role did the government play in developing this market
3. What was the criteria for qualifying to get the mortgage
4. What role did banks play in the subprime market
5. What is securitization and what role did it play in the subprime loan mortgage market
6. What exactly caused the subprime market to crash
7. How did the government help after the crash
8. How did the subprime market crash affect the normal market for housing
   1. Do you think the subprime loan mortgage program was a good idea and why

Answer 1

1) The subprime loan market is a market that serves individuals with questionable or limited credit histories who borrow for houses, cars, and other general purchases.

2) The government expanded the subprime mortgage market. The result of the government's expansion into the subprime mortgage market was that by the time of the financial crisis, more than half of all mortgages in the United States were subprime or otherwise low-quality mortgages, and the various federal government agencies were directly backing 76 percent of them.

3) A below average credit score will do. Although each lender has its own criteria about which scores it considers prime and which scores it considers subprime, generally, you need a score of at least 740 to be considered a good risk by lenders. Scores of 620 to 799 are usually considered prime. Scores below 620 are subprime. So, scores below 620 will qualify you.

4) Hedge funds, banks, and insurance companies caused the subprime mortgage crisis. Hedge funds and banks created mortgage-backed securities. The insurance companies covered them with credit default swaps. Demand for mortgages led to an asset bubble in housing.

Please post the other questions separately. Thanks and good luck:)