Effect_of_Real_State_Crisis_in_the_World_Economy

of citizens that had the American Dream. He wanted to increase the percentage of home ownership. Around the world and here in the United States if you have the need to buy, sell, Manufacture, finance or invest you have been affected by President Clinton’s influence. I am going to explore the main reason that caused the greatest financial collapse since the great depression of the 1930s. I will explain some of the many effects of attempting to make American home ownership more affordable. mortgage industry. They set the guidelines for what it took to get a mortgage in America. FHA also would facilitate the purchase of mortgages on the secondary market that fit their Guidelines. This allowed mortgage brokers and mortgage wholesalers to go out and originate loans that fit the FHA guidelines. These loans were then sold in the secondary market. The two biggest investors on the secondary market are Freddie Mac and Fannie Mea. Both of these agencies are backed by the country’s government. With the government backing these agencies they were very attractive investment for investors from around the world. In order to increase home ownership the guidelines would have to be expanded to include more Americans. The ‘decision makers’ set forth to expand the guidelines. Mortgage brokers partnered with bankers and Wall Street investors. This partnership yielded an avenue to broaden the guidelines to originate mortgages the rest of the country followed suit. The mortgages were sold to Wall Street investors. The Wall Street investor would then bundle the mortgages to be sold on the world’s open market, as mortgage back securities. Around the world, investors, mutual fund managers and finical opportunists consumed these mortgage backed securities. Money was being made, more Americans The development of creative financing and the subprime market accelerated the ability for more Americans to get mortgages. In the anticipation that home values would continue to raise, Adjustable Rate Mortgages (ARM) and teaser rate loans became the norm. The theory was that the home owner would build equity and refinance in to a more stable safer mortgage before the teaser rate was over or the ARM began to adjust. As a consequence supply became short but demand continued to grow and price continued to rise. This created a ‘bubble’ that grow in to housing market. adjust. This caused many home owners not to be able to make their payments. .Prices of houses had peaked, and as a consequence home owners were unable to make their new payments. Because loan to value ratios (LTV), they could not refinance their mortgages into a more stable, safer mortgages. The amounts of foreclosures begin to rise. Mortgage guidelines begin to stiffen, subprime mortgages went away and created financing stopped. As a result more and more nonperforming assets (foreclosures) on their books. This brings us to the effect of the mortgage meltdown. The media highlighted banks, depositors wanted their money. Because the Banks were unable to give depositors their money they began to collapse. This caused some banks taking over by the Federal Deposit Insurance Corporation (FDIC). The real estate market continued to be flooded with foreclosures. This decreased the value of the houses. causing a ‘ripple’ effect throughout the final effects that the real state crisis on global economy is yet to be determine.