Mortgage crisis presentation.pptx sinyuh

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1. INTRODUCTION The mortgage crisis, also known as the subprime mortgage crisis, had a global impact, but the United States was at the epicenter. Here's a quick rundown of the areas affected, the causes, major events, the effects, and possible precautions :

2. AREAS/COUNTRIES AFFECTED: The mortgage crisis had a widespread impact, with global ramifications. While the United States was at the epicenter of the crisis, other countries, particularly those with close financial ties to the United States, were also severely impacted. Housing market crashes and financial instability occurred in countries such as the United Kingdom, Spain, Ireland, and Iceland.

3. CAUSES Housing Bubble: Rapidly rising home prices encouraged speculation and risky lending practices. Subprime Lending: Financial institutions made loans to borrowers with bad credit, resulting in high default rates. Securitization : Mortgage loans were packaged into complex financial instruments and sold to investors, dispersing risk across the financial system. Deregulation : The relaxation of financial institution regulations allowed for the development of new, risky financial products. Inadequate Risk Assessment: Some financial institutions miscalculated the risks associated with new mortgage products and securitization practices.

4. MAJOR EVENTS The mortgage crisis unfolded over a period of several years, with several key events: Bursting of the Housing Bubble: Home prices peaked in 2006 and began to fall in 2007, resulting in a significant housing market recession. Mortgage Lender Bankruptcies: Several subprime mortgage lenders, including New Century Financial Corp., declared bankruptcy in 2007, heralding the start of the crisis. Financial Institution Failures: Major financial institutions, such as Lehman Brothers, suffered significant losses and went bankrupt in 2008, causing a severe shock to the global financial system. Government Interventions: Governments around the world took steps to stabilize the financial system, such as bailouts of troubled institutions and regulatory reforms.

5. EFFECTS Financial Market Turmoil: The global financial markets were significantly disrupted as a result of the crisis, with numerous financial institutions facing insolvency or requiring government intervention. Housing Market Decline: Home prices fell rapidly, resulting in negative equity for many homeowners and a wave of foreclosures. Economic Recession: The crisis triggered a severe global economic recession, with high unemployment and decreased consumer and business spending. Loss of Wealth: Many investors and individuals lost a significant amount of money on their investments and retirement savings. Government Bailouts and Debt: Governments provided significant financial assistance to troubled institutions, resulting in increased public debt.

6. PRECAUTIONS (What should have been done) Strengthened Regulation: To prevent excessive risk-taking and ensure responsible lending, stricter regulations on lending practices, financial products, and risk assessment should have been in place. Enhanced Risk Assessment : Improved risk assessment models and practices could have aided in the identification and management of risks associated with complex financial products. Heightened Transparency: Greater transparency and disclosure requirements for mortgage-backed securities and other complex financial instruments would have enabled better risk assessment. Prudent Lending Practices: Lenders should have used responsible lending practices, such as verifying borrowers' ability to repay loans and taking creditworthiness into account. Robust Supervision: Increased regulatory oversight and supervision of financial institutions would have been critical in detecting and addressing risky lending practices and potential systemic risks .

7. THE END It is important to note that, in the aftermath of the crisis, many countries have implemented regulatory reforms to strengthen the financial system and prevent a similar crisis from occurring in the future.