The financialization of home and the mortgage market crisis

The financialization of home and the mortgage market crisis

Question one

The idea expressed in these paragraphs describes a risky high-end business which is experienced after the 2007 global financial crisis. Further, the collapse of the economy paved the way for a subprime mortgage where Perl is advised that the situation would be illegal given the regulation of the government. In my opinion, I believe this is a good idea to make money given the fact that there is an overwhelming opportunity

Question two

The article refers to rampant demand yield because of the nature of this type of business which seems to be risky. The economists believe that such an institution is extorting people due to their bad credit records and can cause similar issues leading to the same problem on the financial crisis (Aalbers, 2016).

Question three

The other player who also experienced a similar dilemma is the Deephaven mortgage who was bought about by Goldman for many years to run their residential mortgage business. Their challenge was on the fact that new firms would come in to compete with them due to their increasing loans being written off (Aalbers, 2016).

Question four

The subprime lenders are primarily efficient in providing first mortgages and the second face is also home equity loans and mortgages to those who do not qualify for the conventional financing.  The focus on this sector is to cover and become the leading lending institution; however, the level of increased competition making them take deals from several investment groups is often a challenge.

Question five

The investors are still interested in this product because it has a growth projection which creates an opportunity within the market. The demand for the products and the returns expectation is high when the management of the services and money being borrowed is appropriately allocated into use (Kim, & Ryu, 2015).

Question six

The new regulation has prevented the hot potato game by addressing the responses to the subprime crisis. The focus of this action is considered by regulators and legislators through the lending practices to ensure bankruptcy protection, tax policies licensing and credit counseling measures to be implemented (Kim, & Ryu, 2015).

Question seven

The aim of investors to obtain maximum profits from the business in which they invest. Further, when the investment outlook is good, the interest rates often tend to move higher which could always encourage continuous investment. However, the current interest rates are a worrying trend because the minimum threshold for investors is about 5%. Therefore, below this rate, it would be difficult to operate or otherwise make investors more careful in what they are producing (Kim, & Ryu, 2015).

References

Aalbers, M. B. (2016). The financialization of home and the mortgage market crisis. The Financialization of Housing(pp. 40-63). Routledge.

Kim, J. S., & Ryu, D. (2015). Effect of the subprime mortgage crisis on a leading emerging market. Investment Analysts Journal44(1), 20-42.