Mortgage Market Collapse

Full Name
2007 Mortgage Market Collapse
Event Type
Primary Date

The 2007 Mortgage Market Collapse was caused by a series of unprecedented market collapses when banks sold too many mortgages to feed the demand for mortgage-backed securities sold through the secondary market. With housing prices were rising rapidly and the number of subprime mortgages were rising even more, a housing bubble ensued, and the bubble burst during 2005 and 2006, as mortgage lenders began laying thousands of employees off, if not filing for bankruptcy or shutting down entirely. The ensuing 2007 banking crisis and the 2008 financial crisis produced the worst recession since the Great Depression, triggering defaults, with risks spreading into mutual funds, pension funds, and corporations who owned these derivatives.

  • May have been fueled by low interest rates after the 2000 Tech Collapse
  • Collapse initiated when the Fed started to raise interest rates in 2004 (making new & variable mortgage payments more expensive)
  • Failing Mortgages cause securitized Mortgage structures to collapse
  • These failures cascaded into a larger crisis

Lack of Accountability in Mortgage Market Collapse
  • Although millions lost their homes or saw their investment/retirement accounts crater, there was little accountability placed on those behind the failure
  • No bank CEOs were brought to trial or otherwise held accountable
  • No bailed out banks CEOs lost their jobs - instead years later continue to collect bonuses
  • Ultimately this eroded the publics trust in the US banking system

Other Names for the Mortgage Market Collapse

  • Subprime Meltdown