Financial+Crisis+--+Basic+Background

How the Subprime Mortgage Crisis Works What are subprime mortgages? What's the problem?
 * //*Before reading, look up these words//**: mortgage, fixed rate mortgage, credit score (note: some of these definitions are available at the bottom of the page)

How Mortgage-Backed Securities Work Podcast 20 minute podcast that provides a quality summary of the introduction of the crisis. 1. How can someone own a share of their own mortgage? 2. How does a single mortgage get "pooled" with other investments and go beyond just a local bank? 3. Mortgage securities are a safe way to invest as long as there is... 4. Why was there a demand for more mortgages? 5. What made it possible for banks to lose the risk of paying for defaulted loans? 6. Who eventually assumed the risk for people not paying their mortgages? Why? 7. Great risk can (but as seen through this financial crisis does not always) equal great __. 8. Why is it hard to assess blame for this crisis? 9. Why did some newly built houses not sell well? 10. Why did housing prices drop? 11. What is one example from the podcast of how the economy is interrelated?
 * //*Before listening, look up these words//**: securities, dividends, 401k, mutual fund, investment bank, prime borrower, defaulting, subprime borrowers, finite (amount), Wall Street, foreclosure, trickle-down effect, collateral debt obligations, "sold a bill of goods," predatory lending, ARM ("adjustable rate mortgage")
 * //*Consider these questions while listening: (They are in chronological order from the podcast)//**

media type="youtube" key="h4Ns4ltUvfw" height="344" width="425""How the financial crisis works"

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[|How Mortgage-Backed Securities Work Article] Be sure to read all 3 pages of this article.


 *  MORTGAGE FUNDING PROCESS **

from http://efinancedirectory.com/articles/See_How_US_Home_Prices_Have_Changed.html
 * Look at the chart--what percentage did the average value of homes increase in 2003? In 2005?**

Financial Crisis - Other Helpful Links Several links can also help but are not required reading. Fall 2008 Student Definitions for Econ Crisis Students in Fall 2008 Econ classes defined some of the important terms relating to the financial crisis.
 * // Some other helpful links: //**