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Subprime mortgage crisis

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by

Sandra Vaz

on 10 May 2014

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Transcript of Subprime mortgage crisis

Subprime mortgage crisis
It is a special type of mortgage used in the U.S. for home purchase by customers who have poor creditworthiness and therefore with a greater
risk
of default.
What are Subprime mortgage?
Higher interest rate
Higher fees
Higher margins
for the bank
=
The Central Bank establishes limits on the granting of these mortgages
The subprime debt can be transferred if it is converted into bonds.

The operation removes the loan from its balance sheet and so banks
can continue to lend money.
Greenspan
President of the Federal Reserve of the United States
interest rate from
6.5% to 1%,
credit
consumption
instability
liquidity in the system
“"It is necessary to put
money into circulation and
revive the American economy”
interest rate
cheap liquidity
=

Speculative bubble
in real estate caused by:
the low interest rate
policy of granting of mortgages very lax
The Americans began to buy more houses
high leverage
of families
consumption
was accelerated
increase in
housing prices
great benefits
to investors
higher inflation
interest rates

2004-2006
1% to 5.25%.
Obtain credit was not as easy as before and much more expensive.
Demand for housing
Housing prices
Difficulty obtaining credit

Higher unemployment

Growth of late payment and foreclosures
CRISIS
=
2007
Who are considered the
culprits
of the subprime mortgage crisis?
Alan Greenspan
shares of investment banks
and mortgage brokers
Rating agencies:
Moody's, S & P and Fitch
Central Banks, Governments
and International Agencies
THANK YOU FOR
YOUR ATTENTION
Full transcript