Why were/are most of the sub prime mortgage holders unable to pay their payments?

and what is ';refinancing'; a mortgage do or mean?





do many opt for this?





what does this really do in essence?





does it change the amount a person agreed to pay or what does it do?





Thanks for your answers!Why were/are most of the sub prime mortgage holders unable to pay their payments?
They were traditionally people who rented, because they didn't have the income for a mortgage or deposit. Banks took a huge risk, by lending them money; often as much as 125%. When the sub prime lenders defaulted, the banks repossessed and lost their money because they couldn't sell this debt on.Why were/are most of the sub prime mortgage holders unable to pay their payments?
The word 鈥榮ubprime鈥?refers to a lending practise whereby a lender gives a loan to a borrower who does not qualify for a good interest rate because of a poor credit history. In effect, 鈥榮ubprime mortgages鈥?refers to lending mortgages to people with bad credit.








The beginning of the subprime mortgage crisis has its roots to all the way back in 2001, when the US economy was first hit by the dotcom bubble crash and then September the 11th. In the wake of this the US Federal Reserve dropped interest rates to 1 per cent, making borrowing cheap as the US housing market began to boom. Many mortgage lenders thought they saw a particularly lucrative market by lending to subprime borrowers, i.e. people with adverse credit, because they would be able to charge higher interest rates for the riskier customers.





As house prices continued to increase until 2006, refinancing these mortgages through homeowner loans or remortgaging was relatively easy. However, house prices had risen sharply along with interest rates, and by the end of 2006 house prices began
Subprime refers to the quality of the loan





The quality is determined my many factors but you could use a credit score as a good example of a determinate





In these loans people took out abjustable interest rate. The rates adjust up or down every few years.





the rates adjusted up, making the monthly payment go up, and they were not able to pay the increase so they stoped paying there morgage.





You can refinance to house by pay back you origial loan with another loan taken out at aother account. People do this when they want to lower there payments by taking advantage of a lower interest rate or to take equity out of the house.
Some of the people writing up those loans lied about the incomes of the borrowers. They got commisions. Why would they care if the house got foreclosed two years later? Take the money and run.





It was a big scam gone crazy!
The fact is that mortgage companies became very greedy and were lending increasingly large amounts of money to people who could not possible afford to pay it back.





In the UK Northern Rock lent up to 125% of a houses value in the belief that prices would continue to rise and cover the cost. HOwever, prices levelled off and are now falling.





in the USA the Sub prime mortgage market is people who had previous bad credit, were high risk and couldn't afford to pay back the borrowings. Even faced with all of this the banks still lent them money. They then sold the debts on to other companies and they then on to others so that it all became incredibly difficult to follow. Eventually, when people defaulted on loans all the lenders suffered and here we are today. Global recession and a banking system almost destroyed by greedy bankers and city investors.