What was the source of the problems encountered by many financial ...

[meagbuch]

What was the source of the problems encountered by many financial firms during the late 2000s?
 
  What will be an ideal response?

Question 2

During 2007, many subprime and Alt-A borrowers began to default on their mortgages. Describe subprime and Alt-A borrowers.
 
  What will be an ideal response?

[kalskdjl1212]

Answer to Question 1

The primary source of the problems was that financial firms began securitizing home mortgages. This created a large increase in mortgages being granted to sub-prime borrowers, who are borrowers with flawed credit histories, and Alt-A borrowers, who did not have to document their incomes when applying for mortgages. When housing prices began falling in 2006, many of these borrowers began to default on their mortgages, causing many financial institutions to suffer heavy losses.

Answer to Question 2

Subprime borrowers are borrowers whose credit histories include failures to make payments on bills. Alt-A borrowers are borrowers who fail to document that their incomes are high enough to afford their mortgage payments.