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2007/2008 Housing Market Crash Research Papers

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2007/ 2008 Housing Market Crash Research Paper The bursting of the “US housing bubble” caused the 2007/ 2008 housing market crash. Financial Institutions, Government-Sponsored Enterprises, buyers, and the market are key details about the crash. Fannie Mae and Freddie Mac were created by Congress. They are an important part of the nation’s housing finance system. These two institutions are “supposed to provide liquidity, stability and affordability to the mortgage market. They provide liquidity (ready access to funds on reasonable terms) to the thousands of banks, savings and loans, and mortgage companies that make loans to finance housing”. Before the crash, Fannie Mae and Freddie Mac had a good influence on the mortgage market by increasing …show more content…

Adjustable rate mortgages, began to increase. These were a type of mortgage that the interest rate changes throughout the time you have the loan. Relaxed standard for mortgage loans were something Fannie Mae and Freddie Mac proposed, these rates were much more available then others were; to unqualified people. Low mortgage interest rates were something determined by a lender, they were more affordable. During this crisis, multiple institutions filed for bankruptcy. The American Auto Industry, The Countrywide Financial Corp, The American International Group, The Lehman Brothers, The Washington Mutual, and General Motors are some examples of institutions that filed for bankruptcy. The American Auto Industry was saved by credit loans. The Countrywide Financial Corp was bought out by the Bank of America. The American International group was rescued by the Federal Reserve, The Lehman Brothers were saved by the Barclays Capital, The Washington Mutual was bought out by JPMorgan Chase, and General Motors was saved by government bailout loans. Borrowers took risky loans to get “more house” by falling for the teaser rates they were offered. Home owners were affected when the mortgage rates went back up because

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