Thursday, May. 27, 2010

Subprime Mortgages

The flimsy piece of foundation that brought the U.S. economy tumbling into recession, subprime mortgages are risky loans given to people with shaky credit histories. When interest rates dipped in 2004, banks began granting mortgages to people who really, really shouldn't have had them. Even worse, many were structured adjustable-rate mortgages, with interest rates that climbed after the first few years. The result was a wave of foreclosures and banks with a lot of bad loans on their books. In short, financial catastrophe.