The Housing Financial Crisis, part 1: Subprime Loans and Associated Risks

Re-visiting the Origins of the 2007 Global Credit Crisis


Subprime Loans: The Under-the-Radar Loans that Felled a Market

Subprime Loans and Associated Risks

     The housing crisis beginning in 2007 resulted in approximately 1.5 million foreclosed homes that year and at the time predicted increases in future years according to Joseph Gilbert (2011). Mr. Gilbert also states that “[a]lthough subprime mortgages accounted for less than 20 percent of all mortgages outstanding, just over half of these foreclosure initiations were on subprimes (2011, p. 88). A subprime loan is a loan given to “individuals who do not qualify for prime rate loans” under normal circumstances (Gilbert, 2011, p. 89). Many attribute owning a home to be the most central element towards obtaining ‘The American Dream’, but there were many elements that contributed to…and resulted from the Subprime Loan Housing Crisis.

     Jeff Holt summarizes the contributing factors of the housing crises in 4 primary causes. They are low mortgage interest…

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About sahriskmanager

I have worked as a Head of Risk and a risk culture builder at both Asset Management and Commercial Banking Institutions within and outside of Pakistan. Over the years I have developed exhaustive understanding of risks that exist in both Sharia and Conventional Finance related Investments and Financing/Lending Products. I have invaluable experiences to share with respect to setting up and restructuring of Financial Risk Management Departments at Islamic Banks and Asset Management Firms . This includes developing policy and procedure manuals, recruiting of staff, imparting Risk Trainings and preparing the entire SDI (System, Design & Installation) work-flow frameworks for the department itself. What I shall post on these blog pages are my personal experiences, global risk management issues and academic interests which I would like to share with academicians, students and practitioners of FRM - Financial Risk Management all over the world.
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