Subprime Crisis and Oil Prices Essay Example | Topics and Well Written Essays - 2500 words

Subprime Crisis and Oil Prices - Essay Example But since interest rates rose and the worth of houses dropped in the last two years in the crisis country, refinancing has become more difficult, leading to more instances of foreclosures and defaults. According to RealtyTrac (2008), about 1.3 million housing properties in the U.S. became subject to foreclosure in 2007, which is about 79 percent higher than in 2006. O Fineman, J & Keoun, B (2008) and Onaran (2008) said that about $435 billion was reportedly lost by several banks and financial institutions. A series of market interventions were attempted to bail out some firms, even presenting a $700-billion proposal to the U.S. Congress this month aimed at stimulating their economy and positively inspire the financial market. Just recently, the U.S. House of Representatives controversially rejected the bill, but leaders said they will revise the proposal. The Associated Press (2007) said the value of U.S. subprime mortgages was estimated at $1.3 trillion as of March 2007. Moreover, about 16 percent of subrpime loans with adjustable rate mortgages were 3 months delinquent or currently in foreclosure proceedings as of October 2007, according to Bernanke (2007). According to Duhigg (2008), the U.S. ... According to Duhigg (2008), the U.S. mortgage market might just be estimated at $12 trillion, about ten percent of which is either delinquent or in the midst of foreclosure. Wilson (2007) and Shostak (2007) said there are three types of speculative borrowing that helped accumulate debt, specifically in the subprime mortgage crisis: first is the "hedge borrower" who intends to pay from other investments; second is the "speculative borrower" who believes that they can have service interest on the loan and even continually roll over the principal into new investments; and third, the "Ponzi borrower" who relies on the appreciation of their assets' values to pay-off their debt or loan. Of course the best way to discuss things is to put the listener or the reader in the shoes of the person experiencing the situation being discussed. Say your neighbor is facing a foreclosure, you'll probably think that it should not concern you. I'd say, think again. According to Greer (2008), if there is a foreclosure in your neighborhood, even if you are not struggling to pay the mortgage in your home, it might still cause trouble to you and your property. He said there is a number of reasons why a person should help his or her neighbor avoid foreclosure while you still can. To put it more bluntly, if you live in a neighborhood that has had many foreclosures, your own property value could be at a standstill or worse, dropped proportionally. Greer (2008) further said that "as foreclosures spike, gang activity and crime accompanies the problem hand in hand." According to studies, every 1 percent increase in foreclosures, there is an associated and accompanied 2.23 percent increase in violent crime and problems. Some examples of the impact of