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331:; once the creditor has regained the property purchased with a mortgage in default, he has no further claim against the defaulting borrower's income or assets. As more borrowers stop paying their mortgage payments, foreclosures and the supply of homes for sale increase. This places downward pressure on housing prices, which further lowers homeowners'
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Foreclosures reduce the cash flowing into banks and the value of mortgage-backed securities (MBS) widely held by banks. Banks incur losses and require additional funds (“recapitalization”). If banks are not capitalized sufficiently to lend, economic activity slows and unemployment increases, which
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in their homes, meaning their homes were worth less than their mortgages. As of March 2008, an estimated 8.8 million borrowers — 10.8% of all homeowners — had negative equity in their homes, a number that is believed to have risen to 12 million by
November 2008. Borrowers in this situation have an
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to decline from $ 35.2 billion in 2006 Q4 billion to $ 646 million in the same quarter a year later, a decline of 98%. 2007 Q4 saw the worst bank and thrift quarterly performance since 1990. In all of 2007, insured depository institutions earned approximately $ 100 billion, down 31% from a record
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in
September and October 2008. He further describes the crisis in these other video segments. He called for an additional $ 250 billion to help recapitalize the banks, closure of insolvent "zombie" banks, regulatory overhaul, and $ 300 billion in infrastructure spending during these interviews.
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The first cycle is within the housing market. Voluntary or involuntary foreclosures increase the supply of homes, which lowers home prices creating further negative equity. By
September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. This major and unexpected
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incentive to "walk away" from their mortgages and abandon their homes, even though doing so will damage their credit rating for a number of years. The reason is that unlike what is the case in most other countries, American residential mortgages are
662:– You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
786:{{Information |Description=Chart showing feedback loops within housing market and with financial market and economy |Source=I created this work entirely by myself. |Date= |Author=~~~~ |other_versions= }}
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data indicates banks have significantly tightened lending standards throughout the crisis. Unemployment in the U.S. has increased to a 14-year high as of
November 2008.
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for more information. If an SVG form of this image is available, please upload it and afterwards replace this template with
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their holdings of subprime related securities by US$ 501 billion. Mortgage defaults and provisions for future defaults caused profits at the 8533 USA
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profit of $ 145 billion in 2006. Profits declined from $ 35.6 billion in 2007 Q1 to $ 19.3 billion in 2008 Q1, a decline of 46%.
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It is recommended to name the SVG file “Subprime crisis - Foreclosures & Bank
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described the vicious cycles within and across the housing market and financial markets during interviews with
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The following pages on the
English Knowledge (XXG) use this file (pages on other projects are not listed):
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Permission is granted to copy, distribute and/or modify this document under the terms of the
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The images below contain additional high-level explanation of the crisis further citations.
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Chart showing feedback loops within housing market and with financial market and economy
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thumb|Domino Effect As
Housing Prices Declined – Diagram 2 of 2
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decline in house prices means that many borrowers have zero or
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thumb|Factors
Contributing to Housing Bubble – Diagram 1 of 2
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Cycle Two: Financial Market and
Feedback into Housing Market
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Cycle Two: Financial Market and
Feedback into Housing Market
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Subprime crisis - Foreclosures & Bank Instability.png
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Add a one-line explanation of what this file represents
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Fair value accounting and the subprime mortgage crisis
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GNU Free Documentation License, version 1.2 or later
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NYT - How to Help People Who's Homes are Underwater
352:further increases foreclosures. As of August 2008,
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