Mortgage Crisis in the United States
Mortgage: A loan on a house
Chances the incentives of mortgage loans
A derivative that takes individual mortgages in which banks can only be repaid by the spender, collects all of them and sells to a third party
banks would only make money on repayment, now not the case
The risk is now in the hands of the third party
Deregulation in neoliberalism
Before 1999, banks could not offer mortgages to masses of third parties
Freed up banks from just individual mortgages to make more profits
As a result of this, the sale of houses balloons, the number of mortgages increases + the purchases of Mortgage backed securites
Who can you offer mortgages to? - People who did not own homes - Subprime Borrowers
Definition: A group of potential borrowers that are not good risks, leads to higher interest rate
“predatory” lending - imposing unfair, deceptive or abusive loan terms on borrowers
Teaser Loan: offer an easy affordable rate for first years of mortgage, then increases dramatically during the later years
misleading attractive terms at the beginning of the loan
Adjustable-rate mortgages, or ARMs, which had low initial “teaser” rates that lasted for the first two or three years and then increased afterward
banks would keep offering these loans to subprime borrowers
Subprime and “Assetization”
US housing market bubble
was fluxuating greatly during this time
Can think about a house as an asset, therefore its an investment
The value of real estate was increasing every year
Interest rate policiy in an indebted economy
interest rates dropped extremely low
housing suddenly became very affordable
(low interest rate time period encourages debt)
fixed rate mortgage—interest rate doesn’t change, less risky
variable rate mortgage-interest rate is linked to the bank’s policies
Increase in interest rate
governments worried as the debt to interest rate is very high, want to increase interest rates
increase in delinquency and foreclosure
People started struggling and unable to pay it back
Lead to a decline in housing prices
Financial Firms start to fail
countrywide financial firm
September 2008 financial crisis starts
mortgage backed securities aren’t being paid off
American and European governments had to pay off to keep economy afloat
6-7 questions + 2 long answer questions (slightly weighted to the material after the term test)
(8-9 for whole test)
take something abt debt and ask what a lineage would think about that
Liberal view of debt: (how would market balance itself out)
In favour of deregulation of the market
part of the instability that caused the crisis
they would argue that all that needed to happen to avoid crisis is to not help out poor people
banks tried to get poor people in the housing market, should have
let the financial institutions fail and not bail them out, so that they are less likely to make that mistake again
problem is that if you dont bail out financial institutions, the economy fails
How would marxist lineage interperet certification schemes
mostly against because of commodity fetishism
label doesnt reveal enough for marxist, doesnt pull it back far enough
Four worlds of student finance
how many students recieve loans
how much tuition costs
Mortgage: A loan on a house
Chances the incentives of mortgage loans
A derivative that takes individual mortgages in which banks can only be repaid by the spender, collects all of them and sells to a third party
banks would only make money on repayment, now not the case
The risk is now in the hands of the third party
Deregulation in neoliberalism
Before 1999, banks could not offer mortgages to masses of third parties
Freed up banks from just individual mortgages to make more profits
As a result of this, the sale of houses balloons, the number of mortgages increases + the purchases of Mortgage backed securites
Who can you offer mortgages to? - People who did not own homes - Subprime Borrowers
Definition: A group of potential borrowers that are not good risks, leads to higher interest rate
“predatory” lending - imposing unfair, deceptive or abusive loan terms on borrowers
Teaser Loan: offer an easy affordable rate for first years of mortgage, then increases dramatically during the later years
misleading attractive terms at the beginning of the loan
Adjustable-rate mortgages, or ARMs, which had low initial “teaser” rates that lasted for the first two or three years and then increased afterward
banks would keep offering these loans to subprime borrowers
Subprime and “Assetization”
US housing market bubble
was fluxuating greatly during this time
Can think about a house as an asset, therefore its an investment
The value of real estate was increasing every year
Interest rate policiy in an indebted economy
interest rates dropped extremely low
housing suddenly became very affordable
(low interest rate time period encourages debt)
fixed rate mortgage—interest rate doesn’t change, less risky
variable rate mortgage-interest rate is linked to the bank’s policies
Increase in interest rate
governments worried as the debt to interest rate is very high, want to increase interest rates
increase in delinquency and foreclosure
People started struggling and unable to pay it back
Lead to a decline in housing prices
Financial Firms start to fail
countrywide financial firm
September 2008 financial crisis starts
mortgage backed securities aren’t being paid off
American and European governments had to pay off to keep economy afloat
6-7 questions + 2 long answer questions (slightly weighted to the material after the term test)
(8-9 for whole test)
take something abt debt and ask what a lineage would think about that
Liberal view of debt: (how would market balance itself out)
In favour of deregulation of the market
part of the instability that caused the crisis
they would argue that all that needed to happen to avoid crisis is to not help out poor people
banks tried to get poor people in the housing market, should have
let the financial institutions fail and not bail them out, so that they are less likely to make that mistake again
problem is that if you dont bail out financial institutions, the economy fails
How would marxist lineage interperet certification schemes
mostly against because of commodity fetishism
label doesnt reveal enough for marxist, doesnt pull it back far enough
Four worlds of student finance
how many students recieve loans
how much tuition costs
