Research Paper on:
RESEARCH PAPER: MORTGAGE LOAN CRISIS

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it comes to buying a house, the process is fairly straightforward. The buyer finds the house he/she likes, then searches out financing, through a lender or bank. If the buyer  has poor credit, he/she gets denied the loan, and the house. In recent years, this formula has changed, as the subprime market  expanded. "Subprime" is directed toward borrowers with credit scores generally under 620 and higher interest rates (Bankrate.com, 2006). Such loans have been considered risky to the lender, as borrowers typically  have lower incomes and a poor record for debt payment (NematNejad, 2007). Subprime also includes second-lien mortgages, in other words, another mortgage on the same property (Buckle, 2007).  Just how risky the subprime market is has been outlined in the past eight months, when a record number of subprime loans have defaulted,  leading to a meltdown of the entire credit market. As a result of the collapse, a record number of homeowners have defaulted on their loans, while many subprime mortgage companies  are going out of business. Even the supposedly "solid" companies, such as Citibank and Countrywide are suffering, as these were companies with a large amount of money tied up in  subprime loans. As the economy and credit markets attempt to recover from the debacle, the best path out of the subprime mess  is to initiate more stringent rules -- and better oversight -- when it comes to the mortgage lending industry. Also, better consumer awareness is mandatory when it comes to this  type of situation. The Problem There are many reasons why the credit market crashed and burned. Talk to accountants, and theyll tell