Study of the US Subprime Mortgage Crisis

Abstract

The US subprime mortgage crisis of 2007-08 was the reason of the economic slowdown as well as the recession in not only in the then safe considered investment destination,theUnitedStates but also almost on the entire globe. It was a crisis caused by a sudden and accidental increase in foreclosure of properties in early 2007. Because of the inadequate policies of the government in early 2000 related to monetary management, a housing bubble was created in which costs of properties were augmenting vastly. Thus the instant factor for the mortgage menace canbe attributed to theblasting of the assets bubble which had spiked in 2006. The interest rates on subprime lending augmented by end of the year 2006 as well as the prices of propertiesleaned which became a factor for anunexpected increase in foreclosure stir. Our dissertation contains the analysis which hintsthat even if the decrease in the US rate of interest could fascinate higher number of subprime customers yet is not a powerful cause to influence the worldwide slowdown,the crisis could had confined within the United States if portfolio managers had not bought the securities supported by mortgages. Hence, the headway towards securitization is believed to be a powerful reason of the worldwide slowdowns of financial activities.