Mortgage Crisis Essay Example | Topics and Well Written Essays - 500 words

Mortgage Crisis - Essay Example Subprime borrowers, with low rates of 7% to 8%, will see rates reset at numbers like 11%. Prime borrowers are seeing rates jump to 20% and more causing them to come near to defaulting on their loans. This increase in rates will create a domino effect altering most of the financial markets. The mortgage crisis is simply one side of the coin. With the failing economy mortgage lenders and banks are finding it hard to find the cash to support the foreclosures. With the low house demand and the growing defaults companies like American Home Mortgage Investment Corp. and Delta Financial Corp., filed for Chapter 11 bankruptcy protection. Bigger banks are suffering losses as they write down their losses with even a company like Merrill Lynch posting its largest loss in 94-years. With the drop in employment rates and the economy in one of its worst positions for more than a decade a recession seems to be on the way. How bad the crisis will be and how it will alter the consumers lifestyle is what has to be determined as the mortgage crisis takes the country by storm. Being a mortgage collector I have the opportunity to review some of the ARM's, interest only and flexible payment/negative amortization loans. I have found that they are all positioned as tools to help the borrower afford the house for a moment.