The Housing Bubble
People are affected by the economic market that has been created in our society. Certain commodities affect the market on a larger scale than others. One of these commodities is the housing market. The most recent thing that we know of this is due to the movie "The Big Short", where we see the before hand knowledge of a few people who were able to recognize what was about to happen. Even though they saw what was going to happen the only thing that they were worried about was making money in the process. Not a single one of the people involved cared to alert the public as to what was about to happen.
The common thought is that the loans distributed by banks were sectioned off in grouping pairs. So the bank issues the loan and under the loan-e credit score the bank started to group different levels of income together. You would have someone who only can afford a $100,000 lumped in with someone who could afford a $600,000 home. What ends up happening is that people who can only afford the $100,000 buy a house and get a loan for a house worth $600,000. The eventuality being that the people were going to default on their loans resulting in the bank seizing the property back and thus making people homeless in the process.
The problem with this process is that it creates a bubble in the housing market. Not to mention that it creates a bunch of people who start to become homeless. The bubble kept getting bigger and bigger due to the fact that no one was realizing that the loans were defaulting and the houses were being emptied. The newly developed house ended up being empty and created a false market status. The resulting bubble will eventually burst because it has nothing to fall back on. The loans demoralize the credit of those who took them out and the banks lose money due to the fact that there is nothing to collect off of the loans.
According the CBS news this last year, they state in one of their articles that ; "As noted in a study by McClatchy from 2008, “Federal Reserve Board data show that more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions;” “private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year;” and “only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.”This is stating that the resulting problem was not from federally funded banks or loan companies but instead from private business loans offices and private banks not attached to the central banking system. Even though the housing market crash happened ten years ago it is still a hot button issue due to the fact that there were no penalties brought down on any of the corporations or people involved in the scheme.
The common thought is that the loans distributed by banks were sectioned off in grouping pairs. So the bank issues the loan and under the loan-e credit score the bank started to group different levels of income together. You would have someone who only can afford a $100,000 lumped in with someone who could afford a $600,000 home. What ends up happening is that people who can only afford the $100,000 buy a house and get a loan for a house worth $600,000. The eventuality being that the people were going to default on their loans resulting in the bank seizing the property back and thus making people homeless in the process.
The problem with this process is that it creates a bubble in the housing market. Not to mention that it creates a bunch of people who start to become homeless. The bubble kept getting bigger and bigger due to the fact that no one was realizing that the loans were defaulting and the houses were being emptied. The newly developed house ended up being empty and created a false market status. The resulting bubble will eventually burst because it has nothing to fall back on. The loans demoralize the credit of those who took them out and the banks lose money due to the fact that there is nothing to collect off of the loans.
According the CBS news this last year, they state in one of their articles that ; "As noted in a study by McClatchy from 2008, “Federal Reserve Board data show that more than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions;” “private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year;” and “only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.”This is stating that the resulting problem was not from federally funded banks or loan companies but instead from private business loans offices and private banks not attached to the central banking system. Even though the housing market crash happened ten years ago it is still a hot button issue due to the fact that there were no penalties brought down on any of the corporations or people involved in the scheme.
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