What is Subprime CrisisThe subprime crisis, also regularly known as the mortgage bust, is a financial crisis that occurred between the years 2008 and 2009. It is the result of excessive borrowing from many home buyers who have bad credit. scores. This act of lending is called a subprime loan. During this period, many homebuyers defaulted on their monthly payments as their interest rates increased over time. With this, there has been a sharp increase in mortgage foreclosures. This has led to numerous bankruptcies of participating financial institutions that act as subprime or mortgage lenders. As if that wasn't crucial enough, all of this also took a toll on investors who played a role in facilitating subprime lending to borrowers by purchasing mortgage-backed bonds. Although it didn't gain visible attention until 2008, it started with HSBC announcing it would set aside $11 billion to cover costs due to increased losses and defaults. subprime mortgages in February 2007. Since then, significant losses have started to occur. hit other financial institutions and the mortgage market began to collapse. The subprime crisis was caused by a few major factors and involved several major parties in the United States. . This type of loan is intended for borrowers who have poor credit scores or poor credit history. These borrowers also have weak documentation regarding their sources of income. But these loans carry higher interest. Borrowers will be attracted so easily because they will be offered fixed monthly repayments with relatively low interest ... middle of paper ...... and housing values ​​are likely to increase with demand, Investors predicted that these mortgage-related investment products would generate higher income. Additionally, respectable credit rating agency companies have given high ratings to these products, making investors feel safe investing in them. Relaxed Standards for Mortgages When regulations were stricter before, most mortgages loaned at a fixed rate will require a deposit. at least 20% of the price of the house. In addition to this, buyers will need to prove that their income is sufficient to guarantee the monthly payment by providing official supporting documents. However, the Community Reinvestment Act, which is a federal agency whose goal is to encourage financial institutions to meet the needs of communities, requires banks to expand their mortgage loans to low-income families..