MORTGAGE ORIGINATION
Updated 650 days ago
Mortgages. Simply stated, they are essentially an extremely large loan to individuals so that they may purchase housing. How could these seemingly basic financial products be blamed in the media for the financial crisis of 2007-2008?...
The answer lies not only in the rapid increase outstanding mortgages, but also in the types of mortgages that were created in this period - many of which went to unworthy or "subprime" borrowers. More importantly, however, was the fact that these risky mortgages were pooled together as investment products that linked the entire financial system together for a dangerous level of systemic risk. However, an understanding of why these mortgages were created and what made these mortgages risky is needed to understand their consequences in the financial system.