Monday, July 23, 2012

Sub Prime Mortgage Lending

Real Estate
Real Estate (Photo credit: wvhomes)
Rather unfortunately, the real estate market was the market that helped bring down many other markets in the United States and the rest of the world. It resulted in many businesses failing and shutting doors, and it even contributed to bankrupting several countries. The biggest contributing factor to the real estate downfall was subprime mortgage lending, in which large mortgages could be split up into pieces and sold to other investors. It was regarded as a fairly safe way to make a good chunk of cash, and the real estate market was booming at the time, so why not hop into a fairly safe and secure market that pays good dividends.

Home prices peaked in mid 2006, then took a bit of a plunge which led to more expensive monthly interest rates. Home owners had more trouble paying off their debts, investors were not receiving the money they were expecting and the market quickly collapsed in on itself. Now that we're climbing out of the mess, it's time to look back on the whole situation and see who is to blame, if anyone.

The US Government has put quite a few strict regulations on subprime mortgage lending, making the market much less volatile, but also much less profitable. There's no doubt that in a perfect economy, no regulations should be in place to control the huge returns that would be possible, but history tells that we live in no such economy. How many restrictions should be in place? Could too many put a damper on our overall economy? Tough questions to answer and I don't want to pick a side!

A much safer market, and profitable one since the real estate market collapse, is the apartment housing market. Companies like First Troy Corp. Rentals, which offers a variety of apartment housing options including rental townhomes, rental houses, rental ranch style apartments, and rental doubles, have seen great growth in a struggling economy.
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