Subprime lending could be the main reason that America and the global economy is in the financial crisis it is currently in. Giving individuals loans for 10 times their salary was never a smart business practice. It definitely was not a smart business practice but it was definitely a way to make some quick money. Several of the subprime lenders made MILLIONS of dollars from 2003 to 2006. Many of these lenders are now out of business but many of the CEO’s and executive management staff made millions of dollars and got out while the iron was hot.
There is absolutely no doubt that the subprime mortgage crisis was a headline for mortgage news outlets over the last three years. During the initial fall of Bear Stearns and other Wall Street firms, the one would that you heard every single day on CNBC or FoxBusiness was subprime. Unfortunately, in the beginning, no one had any idea just how bad the crisis was going to get. In reality, everyone knew that a couple with the combined income of $65,000 should NOT own a home for $600,000 but this was the case in America.
What makes matters even worse is that many of these borrowers continued to refinance their loans because they were in some type of adjustable rate mortgage. Little did they realize that the rate was going to eventually adjust higher and their home might not be worth as much as they thought it was. Today, instead of subprime mortgage crisis, the mortgage news is foreclosures reach all time highs.