Subprime Mortgage
The rising Interest rate and the falling housing market are causing the borrowers to default on their mortgage. The subprime lenders such as Country Wide Financial, Accredited, HSBC, GM’s GMAC are suffering.
What is causing subprime lenders down fall?
Subprime borrowers are those who do not qualify for prime market interest rates because of limited or blemished credit. The banks that lend money to them charge them a higher interest rate due to higher risk. Competing for the customers, the banks started drastically lowering the lending standards since the end of 2005. As the interest rate is going up and the housing sector is in the downturn, more and more people are defaulting on their loans.
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