In 2007 the housing market crash was one of the worst crashes the market has ever seen. Depending on who you ask, you could say that it nearly caused a second great depression in the United States. Some may say that we actually did go into a depression but a lot had changed since the last great depression so it is hard to compare numbers and statistics. Subprime lending took a major role in the crash of the housing market. Subprime mortgages were loans that were given to people with poor credit. Often the credit score was below 500. For example, people in the movie House of Cards who were working at a pizza place were able to get loans for houses they could not afford. At the time they weren’t checking for any proof of income when signing for a loan. People who were making minimum wage were lying and saying they make quadruple that so they would get approved. No one ever asked them from paystubs, W2s, assests, or anything else that would have proof of actual income on them. The loans were often known for having …show more content…
People began taking out second mortgages secured by the price appreciation. “The federal reserve and banks praised the housing market for helping to create wealth and provide a secured asset that people could borrow money to help the economy grow. There was a lot of financial innovation at the time, which included all sorts of new lending types such as interest adjustable loans, interest only loans and zero down loans”(Tom DeGrace). Many people began buying and flipping homes for profit once they began to see the housing prices go up. Rating agencies were basically handing people AAA ratings just so they would keep the customer coming back for more. These AAA ratings caught the eyes of many foreign investors. As this was going on cash reserves began getting smaller and smaller. Certain areas began to see prices jumping 20% per