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Essay / Research Paper Abstract
This 3 page paper examines this volatile market in modern times. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: RT13_SA811sub.rtf
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Unformatted sample text from the term paper:
make money for companies because the interest rates are so much higher than the prime markets. In essence, banks take the risk but they also build in higher interest rates
to mitigate that risk. Of course, the situation is more complex than that. Still, one has to wonder if it was the risky lending on the part of the bank
that caused the subprime lending debacle or something else. Yezer (2004) explains that many of the features of the subprime mortgage market seems to agree with simple economic models as
they relate to efficiency in the credit market. There are a variety of offerings that appeal to different types of borrowers and credit risk is priced into the products (Yezer,
2004). Subprime borrowers are divvied out into categories, but it seems that delinquency and default rates are higher for these loans (Yezer, 2004). Interestingly, the subprime markets are competitive so
there is aggressive pricing (Yezer, 2004). In other words, while borrowers of the past had little way to secure mortgages, todays world include many possibilities. Yet, it is also the
case that the market does not yield as much profit (Yezer, 2004). One then has to wonder why if the default rate is higher and profits are lower that there
is such an interest in this market. Over the years, as business grows, there needs to be a new customer base. Products are always being developed in different industries
to meet customer needs. The more products that a firm has to market, the more likely that any client who steps into the room will be well served. Gone are
the days when people are turned away for mortgages because of bad credit or because they do not make enough money. Today, one can get a mortgage that is longer
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