Subprime Crisis Essay

“Interview on the US’s subprime crisis”

Introduction

The subject of this interview is “the causes and effects of the subprime mortgage crisis” the core players in this industry include the homebuyers and business people or investors. The interviewer’s name is Aimee Peters, an investor in Texas. John Holmes has been in the home selling business since 1994 and he has vast experience and information in this industry. This interview seeks to examine the effects of subprime mortgage to homebuyers (consumers) and home sellers, the business people.

Summary of the interviewers’ views

Background and immediate cause of the subprime crisis

The United States’ subprime mortgages crisis can be summed as a set of actions and conditions that were fundamental attributes of a financial crisis and ensuing recession, which become evident and visible in 2008. Some of the actions or factors that contributed to this crisis of rise and fall of housing costs are attributed of the securities held by the financial institutions. The ensuing years leading to the crisis, the United States had received large sums of money in terms of foreign loans from fast developing economies such as Asia and other oil manufacturing nations (Rao, and Sisodiya, 11). The huge inflow of foreign funds and low U.s rates of interest between 2002 and 2004 is attributed to the volatile milieu characterised by easy credit conditions. This environment is immensely attributed to the housing and credit bubbles. However, the immediate cause of the subprime crisis was the bursting of the US’s housing bubble. The bubble peaked between 2005 and 2006.

Characteristics of the subprime crisis

The crisis was characterized by an increase in subprime mortgage negligence and foreclosure, and the ...

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...ing force behind this enormous commercial intention was the homeowners’ speculation of positive the market trends. On the same regard, the crisis rendered the consumers helpless, as those who bought the homes on mortgage were unable to repay consequently default rates skyrocketed.

Conclusion

In conclusion, the subprime crisis was historic economic crisis that the US and other European nations underwent. This kind of crisis can be avoided in future if the US government implements stringent policies guiding borrowing mortgage lenders and other private financial institutions (Rao, and Sisodiya, 34). The effects to both the consumers and the homeowners were severe and the overall result was the US recession. These economic situations can reoccur if the government and the private sector cannot embrace sound regulations and ensure they are implemented to the later.