Boca Raton Bankruptcy Lawyer

Subprime Mortgages and the Financial Crisis

For those feeling the pinch of the global economic crisis, few things are as frustrating as trying to make sense of the big-picture events and abstract concepts that affect them on such an immediate, personal level. Having little grasp on the basic questions - How did this happen? Who is responsible? - can make the situation feel hopeless.

Sadly, this is due in large part to the sheer fact that the ways in which money changes hands these days are almost infinitely complex. To tug on one thread of the current crisis is to uncover a massive tangle of trading practices, institutions, and social conditions that might be studied for a lifetime.

Although getting a handle on this chain reaction can be daunting, most experts agree that a primary cause involved the U.S. housing market and what is known as subprime lending or borrowing. The basic premise behind subprime mortgaging is that people with lower credit are granted loans in order to purchase their own homes. Naturally, when banks began to offer these deals to those who could otherwise never hope to be homeowners, subprime borrowing took off.

Unfortunately, as is usually the case with something that sounds too good to be true, many of these homeowners were never able to actually pay off their debts, resulting in a rash of foreclosures several years later as housing values changed. However, complicating the issue was the fact that banks had begun to trade in securities backed by the assumption that homeowners would be able to pay off their loans with interest.

As investors rushed to remove their capital, several of the banks involved in these “second-tier” deals were caught dry, which, in turn, uncovered even more complex and questionable trading and banking insurance practices.

Contact Us

Dealing with the possibility of bankruptcy in this swirling financial climate can easily feel overwhelming. To learn more about your options during this trying time, contact an experienced Boca Raton bankruptcy lawyer working with Eric N. Klein & Associates by calling 561-353-2800 today.