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Is the Housing Market Crash of 2008 a Prime Example of Predatory Lending?

In: Business and Management

Submitted By pecan45
Words 4574
Pages 19
Six years after the housing market crashed in 2008 the primary cause of the crash continues to be debated. Speeches have been made and books have been written on the subject. Observers and analysts have attributed the reason for the housing crisis and its collapse in the U.S. to everyone from home buyers, Wall Street, mortgage brokers, mortgage underwriters, investment banks, rating agencies, investors, low mortgage interest rates, low short-term interest rates, and relaxed standards for mortgage loans. Predatory lending was just one of many factors along this transaction chain. Predatory lending consists of loaning money to consumers in the hope and expectation that they will default and the lender will be able to take the collateral (homes.) We will discuss if the government failed to protect its citizens thru public policy and what role (if any) investments in mortgage backed securities played in the market crash of 2008 as well. While economist continue to debate who or what is at fault. The market crash clearly devastated the U.S. economy. We will also discuss how such devastation is considered to be one of the worst market failures in history. The events leading up to the crash are easier to identify after a crash, the signs were in the forefront and ignored by most people, firms, banks, and the government. Together we will embark on a journey to discover what role predatory lending, mortgage backed securities, and relaxed regulations played in the housing market crash of 2008 and to clarify if one or more of these events or a combination of them all can be considered Market Failure.

Keywords: Market Failure, Predatory Lending; Mortgage Backed Securities; Housing Crisis; Public Policy

Six years after the housing market crashed in 2008 the primary cause of the crash continues to be debated. Speeches have been made and...

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