Can you describe in very simple words. thanksHow does the Mortgage and financial crisis came into existance?Banks discovered they could make more money by packaging mortgage loans and selling them on to other investors (or other banks) rather than by keeping them to maturity. While in theory these were very sound loans as they were backed by real assets, the incentives on the banks to make more of these deals led them to lower their lending standards (eg 100% mortgages to people who could not service them), while the whole process fueled a steep and unsustainable rise in property prices.
When prices property eventually started falling and interest rates rose, more and more borrowers defaulted and had their properties auctioned off triggering a viscous circle.
The holders of these loans (the end investors) tried to get rid of them (sell them on) but there were no takers so their prices collapsed leading to the huge writedowns we witnessed.How does the Mortgage and financial crisis came into existance?I think it is : too many loans were granted , against assets which are depreciated in value, due to market losing confidence towards the economic.How does the Mortgage and financial crisis came into existance?Too many people who could never afford too high of a loan went to too many banks filled with too many greedy bankers that authorized too many loans with out too much government oversight.How does the Mortgage and financial crisis came into existance?
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