Wednesday, February 12, 2020
The Global Recession Essay Example | Topics and Well Written Essays - 2750 words
The Global Recession - Essay Example The demand for homes and mortgages continued to increase over the years as buyers became more confident in their buying decisions and the return on their investments thus creating a form of bubble that resulted in a continuing rise in home prices. To further induce the borrowing by home buyers loan terms were further relaxed as plenty of funds were available with the lenders and agencies causing a wide dispersion of credit facility without properly checks and balances (Jaffee 2008). Property agents were assigned the task of bringing potential home buyers to the agency in return for the additional benefits and incentives. At that time, the only aim of the financial institutions was to give loan to as many people as possible to earn more and benefit from the soaring prices of properties. But what they ignored in their greed was to check the repaying competency of their potential customers in order to avoid the future debacle. The financial prudence was ignored and people with low income or bad credit history were facilitated by the lenders. Favorable loan conditions were offered as a way to attract borrowers by lending companies that in fact led to solvency issues for them. Loans offered at variable low rates were expected to increase in the future and many borrowers took mortgages in their anticipation that the high prices will help them to refinance swiftly at more encouraging provisos (Jaffee 2008). However, this did not happen and conditions really worsened ov er a period of time.