How does the sub-prime mortgage crisis affect the average American?

How does the sub-prime mortgage crisis affect the average American?

Jordan Goodman (Personal Finance Author) gives expert video advice on: How is the sub-prime mortgage crisis affecting the economy?; Why did banks give mortgages to people who couldn't afford them?; How does the sub-prime mortgage crisis affect the average American?

The sub-prime mortgage crisis affects the average American in several ways. First of all when the value of homes is going down because people are losing their homes to foreclosure, because their sub-prime mortgage rate goes up and they can't afford it. This means entire neighborhoods are going down in value. It's also affecting Wall Street firms who are taking enormous write-offs because of the loss of value of their sub-prime portfolios; it has also caused an enormous credit crisis. Remaining banks do in fact, not want to lend, or want to lend on much tougher criteria than before. During the heyday of the sub-prime mortgage you could get one for little or no money down with what's called stated income, which means you'd sell them on whatever you want on your income and they didn't have to have any proof of it. These are often what is known as liar loans and loads of those are out there being made, then when they blew up, banks are tightening down much more dramatically, demanding higher credit scores, and in many cases down payments of ten to twenty percent, so in the future there may not be as many sub-prime loans but the implosion of the sub-prime mortgage market is affecting the kind of credit that's available today.