A Brief Summary of the 2007-2008 Mortgage Crisis
You’re no doubt aware that the U.S. real estate market suffered, in popular slang, a “meltdown” in 2007 and 2008, and it’s not over yet. Still, it’s always good to quickly review the facts of the situation before discussing ramifications and implications.
In a nutshell, the mortgage crisis is largely a result of people watching their mortgage payments rise as interest rates rose. Many of these homeowners had unconventional loans, such as interest-only loans or adjustable rate mortgages (ARM). Far too many of them had borrowed more than they could really afford, and when things got tight, they found themselves unable to make their house payment. Because of the sheer numbers of distressed homeowners, banks and other financial institutions took a major hit (witness the sale of Bear