Answer to Question #153637 in Finance for Savannah

Question

What might have happened if banks had not issued large numbers of subprime loans in the 1990s and early 2000s?

Answer 1

Subprime mortgages were a polices implemented by the federal reserves amid the 2000s to combat the negative economics from the Great Recession. America's economy was affected as most people were not investing in real estate or were not eligible to secure mortgages from the bank. Subprime mortgages had reduced rates that were affordable to both real estate investors and individuals. Most importantly, subprime mortgages were flexible and accessible to individuals with low credit scores.

The absence of subprime could have contributed further to the deterioration of America's economy. Reduced demand for mortgages would mean reduced value for land and real estate. People that initially had the real estate could have made losses from their assets that could be devalued with the continued recession. The economy, in general, could be affected as revenues from mortgages will not be realized for most people will be scared from real estate investment.