Intermediate Microeconomics Essay Example | Topics and Well Written Essays - 750 words - 1

Intermediate Microeconomics - Essay Example es alike : all declared bankruptcy and the State had to infuse millions of $s into the economy in the form of economic stimulus to keep the economy from completely crunching. "This collapse in housing value is sucking in all borrowers," said Mark Zandi, chief economist at Moodys Economy.com. The New York Times quotes â€Å"Like subprime mortgages, many prime loans made in the United States in recent years allowed borrowers to pay less initially and face higher adjustable payments a few years later. As long as home prices were rising, these borrowers could refinance their loans or sell their properties to pay off their mortgages. But now, with prices falling and lenders clamping down, homeowners with solid credit are starting to come under the same financial stress as those with subprime credit.† An article in the WSJ [2007] speaks about the sub prime crisis and its analysis by the Journal., â€Å"To examine the surge in subprime lending, the Wall Street Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities†. According to the same article, even in 2006, when the housing market was weakening, some lenders were still willing to make riskier loans. The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when residential property prices were at their peak i n many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans.†This article describes how the subprime