The Subprime Lending Crisis

In my book I analyzed what caused the U.S. subprime
mortgage market meltdown and why this triggered a
global credit crunch. In the years before rising
house prices, favourable market conditions and a
well-defined channel of financial intermediaries
drove the expansion of the U.S. subprime mortgage
market. The result was that borrowers with shaky
credit history who did not satisfy standard
underwriting criteria obtained loans, which was
praised as innovation. Subprime mortgage loans were
packed into complex bundles of securities and sold to
investors all around the world. In 2006, thousands of
homeowners became delinquent and defaulted on their
mortgage payments when the housing bubble was
bursting and interest rate reset to higher levels
because they could only afford the initial teaser
rate of their hybrid adjustable rate mortgages.
Unknown exposure dried up the demand for
mortgage-related securities. Banks had to write down
billions of dollars because of losses of
subprime-related securities and some of them were
bailed out. Fears and uncertainty caused a crisis of
liquidity and confidence, a global credit crunch in
financial markets and a sell of on equity markets.

Autorentext

The author was born on the 29th of January 1984 and has aMaster's Degree in Business Administration from the University ofVienna, Austria and LUISS Rome, Italy. He speaks German, Englishand Italian and works as a Relationship Manager for a private bank. Contact: chris.amann@gmx.at

Klappentext

In my book I analyzed what caused the U.S. subprimemortgage market meltdown and why this triggered aglobal credit crunch. In the years before risinghouse prices, favourable market conditions and awell-defined channel of financial intermediariesdrove the expansion of the U.S. subprime mortgagemarket. The result was that borrowers with shakycredit history who did not satisfy standardunderwriting criteria obtained loans, which waspraised as innovation. Subprime mortgage loans werepacked into complex bundles of securities and sold toinvestors all around the world. In 2006, thousands ofhomeowners became delinquent and defaulted on theirmortgage payments when the housing bubble wasbursting and interest rate reset to higher levelsbecause they could only afford the initial teaserrate of their hybrid adjustable rate mortgages.Unknown exposure dried up the demand formortgage-related securities. Banks had to write downbillions of dollars because of losses ofsubprime-related securities and some of them werebailed out. Fears and uncertainty caused a crisis ofliquidity and confidence, a global credit crunch infinancial markets and a sell of on equity markets.