...United States Mortgage Crisis After rising at an annual rate of nearly 9 percent from 2000 through 2005, house prices have decelerated, even falling in some markets. At the same time, interest rates on both fixed- and adjustable-rate mortgage loans moved upward, reaching multi-year highs in mid-2006. Some subprime borrowers with ARMs, who may have counted on refinancing before their payments rose, may not have had enough home equity to qualify for a new loan given the sluggishness in house prices. In addition, some owners with little equity may have walked away from their properties, especially owner-investors who do not occupy the home and thus have little attachment to it beyond purely financial considerations. Regional economic problems have played a role as well; for example, some of the states with the highest delinquency and foreclosure rates are among those most hard-hit by job cuts in the auto industry. The rate of serious delinquencies--corresponding to mortgages in foreclosure or with payments ninety days or more overdue--rose sharply during 2006 and recently stood at about 11 percent, about double the recent low seen in mid-2005.3 The rate of serious delinquencies has also risen somewhat among some types of near-prime mortgages, although the rate in that category remains much lower than the rate in the subprime market. The rise in delinquencies has begun to show through to foreclosures. In the fourth quarter of 2006, about 310,000 foreclosure proceedings were initiated...
Words: 1102 - Pages: 5
...direct assault at the root of the problem, Moore has created space in the political mainstream for a radical conversation (radical meaning “going to the root”). It’s a conversation that is desperately needed as the economic crisis continues to devastate low- and middle-income Americans in spite of President Obama’s and Congress’ efforts to stop the bleeding by throwing trillions of dollars at the banks. Yesterday, Democracy Now! reported that while the Dow Jones topped 10,000 for the first time in a year, foreclosures have reached a record level of 940,000 in the third quarter. But with this film airing in major chain cinemas across the nation, the normally taboo topics of how wealth is divided, who owns Congress, and how vital economic decisions are made are now open for discussion in a way they haven’t been in the U.S. for decades. In Capitalism, Michael Moore features the reality of the economic crisis for America’s usually-invisible poor and working class. The movie begins with a family filming their eviction from their own home. In a terrifying scene, we watch from inside their living room window as 7 police cars roll up to throw the ill-fated family onto the street for failing to make their payments. Moore explained in an interview, “You see [a foreclosure] really for the first time from the point of view of the person being thrown out of the house.” This same bottom-up viewpoint carries the audience through the rest of the film, from the stories of kids in Pennsylvania...
Words: 1772 - Pages: 8
...THE FUTURE OF FORECLOSURE LAW IN THE WAKE OF THE GREAT HOUSING CRISIS OF 2007-2014 Clinical Professor of Law Notre Dame Law School Judith Fox 54 WASHBURN L. J. (forthcoming, 2015) Notre Dame Law School Legal Studies Research Paper No. 1504 A complete list of Research Papers in this Series can be found at: http://www.ssrn.com/link/notre-dame-legal-studies.html This paper can be downloaded without charge from the Social Science Research Network electronic library at http://ssrn.com/abstract=2573203 Electronic copy available at: http://ssrn.com/abstract=2573203 The Future of Foreclosure Law in the Wake of the Great Housing Crisis of 2007-2014 Judith Fox* ABSTRACT As 2014 came to an end so, perhaps, did the worst foreclosure crisis in U.S. history. On January 15, 2015, RealityTrac, one of the nation’s leading reporters of housing data, declared the foreclosure crisis had ended. Whether or not their declaration proves true, the aftermath of the crisis will be felt for years to come. During the crisis it is estimated more than five million families lost their homes to foreclosure. Federal, state and local responses to the crisis changed laws and perceptions regarding foreclosure. Despite these changes, we end the crisis much the way we began---with a nationwide foreclosure system mistrusted and disliked by lenders and consumers alike. This paper examines the responses to the crisis in an effort to determine what worked, what did not, and where foreclosure law should...
Words: 21324 - Pages: 86
...INTRODUCTION TO THE CRISIS .…………………………………...p.4 3. THE FINANCIAL AND CONSTRUCTIVE CAUSES. ………………...p.5 4. CONSEQUENCES 4.1. FINANCIAL MARKETS 4.1.1. 2007 ………………………………………………………….p.9 4.1.2. 2008 ………………………………………………………….p.11 4.2. CONSTRUCTIVE BUBBLE ……………………………………...p.12 5. GOVERNMENT INTERVENCION ON… 5.1. FINANCIAL INSTITUTIONS FEDERAL RESERVE AND CENTRAL BANKS ………………..p.19 5.1.2. EMERGENCY ECONOMIC STABILIZATION ACT …....p.21 5.1.3 BAYLOUTS AND FAILURES ……………………………...p.24 5.2. HOMEOWNERS 5.2.1. HOMEOWNERS ASSISTANCE ……………………….....p.26 5.2.2. THE HOMEOWNER AFFORDABILITY AND STABILITY PLAN ……………………………………………….....p.29. 6. INTERVIEW WITH RICARD FERNANDEZ…………………………..p.31 CONCLUSIONS…………………………………………………………….p.35 AUTOAVALUATION………………………………………………………..p.36 BIBLIOGRAPHY AND SOURCES INFORMATION…………………….p.37 1.INTRODUCTION My initial intentions were to elaborate a research project with the objective of comparing the financial crisis in USA and Spain that were and are going through. I was planning on finding all the similarities and differences that were most important or characteristic. When I was half way on the research, I realized how extent the information was, so I reduced to the financial and banking part, and the construction bubble. I did this because I thought they were the most important or interesting (for me) subjects. Finally, I changed it so that I would only work on the financial crisis in the United...
Words: 7538 - Pages: 31
...SUBPRIME MORTGAGE CRISIS The U.S. subprime mortgage crisis was a set of events and conditions that led to the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. What is a subprime mortgage? A subprime mortgage is a type of loan granted to individuals with poor credit histories, who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages. Because subprime borrowers present a higher risk for lenders, subprime mortgages charge interest rates above the prime lending rate. There are several different kinds of subprime mortgage structures available. The most common is the adjustable rate mortgage (ARM), which initially charges a fixed interest rate, and then converts to a floating rate based on an index, plus a margin. The better known types of ARMs include 3/27 and 2/28 ARMs. What lead to the US subprime mortgage crisis? ARMs are somewhat misleading to subprime borrowers in that the borrowers initially pay a lower interest rate. When their mortgages reset to the higher, variable rate, mortgage payments increase significantly. This is one of the factors that lead to the sharp increase in the number of subprime mortgage foreclosures in August of 2006, and the subprime mortgage meltdown that ensued. Many lenders were more liberal in granting these loans from 2004...
Words: 3201 - Pages: 13
...[pic] [pic] Assignment Course code: ECON 403 Course title: Monetary Theory and Policy Lecturer: Asst. Prof. Dr. Hasan Gungor Student: Murad Alakbarov Student number: 065028 Task for Assignment II: Compare and contrast 1929 – 39 Great Depression and current global economic crisis with respect to causes and responses and actions of monetary authorities to this crisis. Introduction “…In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a "panic", and the lingering trough period after the panic was called "depression". The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again. The easiest way of succeeding at this resolve was, simply to define "depressions" out of existence. From that point on, America was to suffer no further depressions. For when the next sharp depression came along, in 1937-38, the economists simply refused to use the dread name, and came up with a new, much softer-sounding word: "recession". From that point on, we have been through quite a few recessions, but not a single depression. But pretty soon the word "recession" also became too harsh for the delicate sensibilities of the American public. It now seems that we had our last recession in 1957-58. For since...
Words: 2010 - Pages: 9
...were revisited for the first time since the post-Civil War Reconstruction years. By 1929, the United States was a very different place—economically and socially. “The nation asks for action and action is now” (Foner). When Franklin D. Roosevelt (FDR) assumed the presidency on March 4, 1933, America’s banking system was in the midst of a collapse. Bank failures and runs on banks had begun immediately following the stock market crash in 1929, causing a national emergency with widespread unemployment, falling prices and production, property foreclosures and, by the end, the thousands of bank closures literally wiped out millions of dollars in deposits. Within weeks of Roosevelt’s inauguration, the banking crisis was over, aided in part by the creation of the Federal Deposit Insurance Corporation (FDIC). However, the Great Depression would continue on for many months, and no single group of citizens was left untouched by this economic crisis. In Roosevelt’s first three months in office (the Hundred Days), the president passed a multitude of laws aimed at restoring the country. The centerpiece of the plan for combating the Depression was the National Industrial Recovery Act (NRA). Following quickly were several additional programs—the Economy Act, the Federal Emergency Relief Administration, the Civilian Conservation Corps (CCC), the Tennessee Valley Authority (TVA), and the Public Works Administration (WPA)—to name but a few (Foner). Collectively these programs formed Roosevelt’s...
Words: 1243 - Pages: 5
...Carla Hill Speech 108 Teacher – Ms. Margot Williams Homelessness in America To inform To inform the audience about the homeless crisis in America Homelessness in America I. Introduction Individuals nationwide are experiencing homelessness. Even the most educated people have joined the homeless. The major contributing factor of homelessness is the recession that our nation is experiencing. The country’s economical status is in a very critical state, causing numerous corporations and businesses to close. Our economical downturn based on documented statistics show there are high unemployment rates across the country. There are also other contributing factors that play a role in homelessness. II. Body The major reason for the homelessness in America is the recession. According to, The National Alliance to End Homelessness it is estimated that the recession will force another 1.5 million people into homelessness over the next two years. The second reason for the homelessness in America is high unemployment rates worldwide. This is a trickle down effect that has caused the recession. With the nation’s economy in such a critical state of downturn, numerous corporations and businesses around the world have either down-sized in the amount of employees on staff or closed altogether. There are other factors for homelessness in America: 1. Unaffordable housing is the result of individuals who have lost their jobs or simply...
Words: 485 - Pages: 2
...US Financial Crisis US Financial Crisis This paper aims to describe the US Financial Crisis in terms of causes, impact, and remedial actions taken by the public and private sectors. It presents the thesis that the financial crisis is also a crisis of values that prompts a reevaluation of the premises of American capitalism. In particular, that prosperity is the foundation of peace and order. A review of literature provides the basis for a short commentary on the subject. Preliminary review of literature on the subject brings to fore some distinct patterns in consumer and investors behavior that make them peculiarly venerable. First is the tendency of investors to join the bandwagon of speculative investment and of putting their money where others put theirs. Second is an apparent lack of understanding on the relationship between risk and returns. Third is an apparent lack of appreciation for the principles of supply and demand. The principle states that excessive supply will reduce the price and demand for a product to the advantage of the buyer, while a lack of supply will increase demand and price of a product to the advantage of the seller. Causes Economists stress the importance of tracing the root causes of the financial crisis in order to provide a systemic solution to the present financial crisis. Most references present the cause of the financial crisis to be the “subprime mortgages.” However, subprime mortgages by itself did not cause the housing bubble...
Words: 9783 - Pages: 40
...2 | Financial Subprime Mortgage Crisis Causes | 3 | Introduction & Background to the Situation of the Egyptian Economy prior to the Global Financial crisis | 10 | Financial Subprime Mortgage Crisis Impacts on Egypt | 13 | The Egyptian Economy & the crisis | 21 | The Conclusion & Solutions | 23 | The References | 27 | The Introduction In the second half of 2008, the world economy went through a serious financial upheaval that sparked off in the United States and spread to Europe and the rest of the world. The negative consequences of this financial crisis had bitten the Egyptian economy in many fields. Egypt’s growth rate witnessed setbacks and may have posted its slowest annual growth in half a decade in 2008–2009 as the global crisis hit revenue from tourism, migrant labor remittances, the Suez Canal, export revenues, and investment. The severity of the crisis and its uncertainties demonstrated the need for urgent action to restore financial stability, lead the economic recovery and secure a sustainable future for the country. This paper therefore critically discusses the current global financial crisis and its impact on Egypt. It presents an overview of the Egyptian economy prior to the crisis, followed by an assessment of the depth and impact of the crisis on sectors of the Egyptian economy. Additionally, the paper highlights the actions taken by the Egyptian government to weather the effects of the crisis and concludes with some policy recommendations...
Words: 10329 - Pages: 42
...President Obama’s economic policy The US economy had experienced a series of depression in the past years but it was worst hit by the major terrorist attack of the September 11, 2011 that not only shook the nation but also the world at large. The realities of the recession started hitting the nation officially in December 2007, signaled by the collapse of the housing market and subsequent losses on mortgage related financial assets which in turn resulted to great stress and significant turbulence in the financial markets. All this resulted to an overall fall in the broader economic activity. In an attempt to respond to the worsening economic conditions, the administration lowered the federal funds rate by half the percentage point and as the crisis intensified, Bush’s government instituted the federal tax cuts on all the tax payers (Palley, 2011). The recession came to an end in June 2009 but the resultant economic weakness continued to be experienced in the nation with significant high rates of unemployment levels. There were severe job losses, a fall in family incomes and a rise in poverty levels which impacted negatively on the social life of many Americans. The economic environment also suffered severe losses in terms of drastic fall in investments due to uncertainties in the economy’s future. The adverse effects and subsequent fall in the trading activities led to significant falls in the nation’s gross domestic product. The political atmosphere was not left at peace either....
Words: 1093 - Pages: 5
...Legal Environments of Business Final Exam Essay SHADOW BANKING SYSTEM We hear a lot of talk about the “shadow banking system” and its crucial role in the financial crisis. But are we taking the time to step back and ask some basic questions: What is shadow banking, where did it come from, how did it operate, what role did it play in recent financial crisis and how do we deal with it going forward? Shadow Banking System definition The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions. Comprising Entities The Shadow banking system entities that make up the system is made up of non-depository banks as well as other financial entities which included insurers, hedge funds, investment banks, money market funds, structured investment vehicles, conduits and monolines. Two examples of well-known shadow banking institutions are Bear Stearns and Lehman Brothers. Shadow banking institutions are usually the middle men between the investors and borrowers making it possible for both parties to meet. For instance, if a corporation is looking for funds to borrow, at the same time an institutional investor like Bear Stearns or Lehman Brothers may be willing to lend money. This is where the shadow banking institution steps in to create a passage of funds from investor to the...
Words: 1477 - Pages: 6
...NBER WORKING PAPER SERIES THE FINANCIAL CRISIS AND THE POLICY RESPONSES: AN EMPIRICAL ANALYSIS OF WHAT WENT WRONG John B. Taylor Working Paper 14631 http://www.nber.org/papers/w14631 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 January 2009 I am grateful to John Cogan, Angelo Melino, John Murray, George Shultz and participants in the Global Markets Working Group for helpful comments and suggestions. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2009 by John B. Taylor. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong John B. Taylor NBER Working Paper No. 14631 January 2009 JEL No. E0,G01 ABSTRACT This paper is an empirical investigation of the role of government actions and interventions in the financial crisis that flared up in August 2007. It integrates and summarizes several ongoing empirical research projects with the aim of learning from past policy. The evidence is presented in a series of charts which are...
Words: 7455 - Pages: 30
...The 2008 Subprime Mortgage Crash and response by the Federal Government Philip J. Scanlon University of Redlands Conditions leading the Subprime Mortgage Crash Many factors contributed to the subprime mortgage crisis, a disruptive economic downturn that its severity can be compared to the Great Depression. Only federal intervention prevented a possible collapse of the world economic system. Ironically, it can be said that federal intervention in the mortgage industry led to the 2008 collapse. By backing risky mortgages, the government created a new systemic financial contagion that began in the housing market, moved through financial and investment markets, and created a loss of confidence in the financial system on which our economy is based. The following conditions created the crisis: 1. For the government, home ownership kept neighborhoods safe and clean because neighbors, in protecting their property, also protected neighborhoods. Government backed loans were offered to otherwise at risk lenders home ownership to strengthen communities, especially low income communities. 2. The government encouraged lenders to extend riskier loans to those more economically disadvantaged and therefore less likely to honor debt obligations. By guaranteeing the loans, the government allayed concerned bankers and other lenders. Fannie Mae and Freddie Mac, backed by the federal government, allowed financial institutes to sell mortgages as secure investments, creating a new financial...
Words: 1225 - Pages: 5
...Populists were committed to diminishing their financial reliance on the United States’ industrial companies with the government’s authority, developing into the emergence of the populist party. The populists played a huge factor into the transformation of the democratic party by perserving our modern day policies and were able to gather the farmers and working class as they assembled them into a powerful group to alter the political spectrum. Facing personal financial crisis as the Gilded Age continuously chose to support business tycoons over them, the producing classes of farmers, miners, and factory workers of the United States fought throughout the end of the nineteenth century for their own slice of wealth, using the populist political party as their platform to take part in the economic...
Words: 731 - Pages: 3
