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what is sub-prime issue ???????

Answer Posted / aparna

The subprime mortgage crisis is an ongoing real estate and
financial crisis triggered by a dramatic rise in mortgage
delinquencies and foreclosures in the United States, with
major adverse consequences for banks and financial markets
around the globe. The crisis, which has its roots in the
closing years of the 20th century, became apparent in 2007
and has exposed pervasive weaknesses in financial industry
regulation and the global financial system.[1]

Approximately 80% of U.S. mortgages issued in recent years
to subprime borrowers were adjustable-rate mortgages.[2]
When U.S. house prices began to decline in 2006-07,
refinancing became more difficult and as adjustable-rate
mortgages began to reset at higher rates, mortgage
delinquencies soared. Securities backed with subprime
mortgages, widely held by financial firms, lost most of
their value. The result has been a large decline in the
capital of many banks and U.S. government sponsored
enterprises, tightening credit around the world.

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