Question
Generally subprime mortgages are those given to creditors with credit scores of 620 or less.Roughly 20% of U.S. consumers have credit scores that low and
Generally subprime mortgages are those given to creditors with credit scores of 620 or less.Roughly 20% of U.S. consumers have credit scores that low and most of those who get mortgages (usually less than 15% of that category) get adjustable rate mortgages.Generally a bank holds a new mortgage loan paper for 2 seconds before selling that paper to Freddie Mac or Fannie Mae.
Freddie and Fannie then sell the paper to Wall Street where it is consolidated into CDO's that are used as collateral for major Wall Street transactions.
Chris Dodd and Barny Frank pushed Fannie Mae and Freddie Mac to purchase more subprime mortgages during the 1999 - 2010 period so that more Americas could own homes.As a result, subprime mortgages increased from a historical 8% of CDO's up to 20% in the 2004 to 2008 period.
Is this good or does it present unprecedented risks to the economy?Why?
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