U.S. Department of Justice, Office of Justice ProgramsNational Institute of JusticeThe Research, Development, and Evaluation Agency of the U.S. Department of Justice
Presentation — The Buildup to Mass Foreclosure
NIJ Foreclosures and Crime Meeting, March 31 - April 1, 2009
Why the increase in the Subprime Loan Market?
Slide text:- Monetary policies allowed for relaxed movement of risk in structured financial products
+ Focus of spread risk across investors
+ Allowed for lower interest rates
- Securitization of these mortgages are great for investors:
+ Allows investor to reduce or move risk off balance sheet
+ Allows investor to over leverage credit
+ When security is sold looks like a income bounce with no cost to investor
+ Turns future earnings to immediate cash flow in the investor
- Subprime market
+ Popularity of these investment led to availability of cheap credit and reduction of lending standards
+ Teaser rates, non-doc mortgages, piggyback mortgages, and NINJA(No Income, No Job or Assets) mortgages
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