: what was the subprime mortgage crisis ?
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Banks started lending money to home buyers who could not afford it.
And they did it because housing prices kept rising.
You would go to the bank and get a mortgage then fix or just sit on the house for a year or 2 then sell it for big profit…
Banks even had negative interest loans. With these you owed more money every month than you paid in.
The crisis was when suddenly houses stopped going up in price and actually dropped.
Suddenly people who couldn’t afford the mortgage now owed more money than the house was worth.
Now banks had to foreclose and repossess and sell the house. But the house is worth less than they lent out.
Since this kept happening housing prices dropped more because suddenly hundreds /thousands of houses were on the market after foreclosure.
Because the housing market kept dropping even more people who took out loans owed more on the loan than the actual value of the house.
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