2007-08-11 22:43:04 · 4 answers · asked by gogeeta 1 in Business & Finance ➔ Investing
Sub-prime is referring to loans made on real estate, usually houses, to people who have less than desirable credit histories who would not normally have qualified for traditional loans. The financial institutions started this on a hot economy, played with the numbers to make it possible for these people to be able to buy a house, and now we see the effect. About 7 million people are on the verge of losing their houses. As for stock trading, the immediate issue is financial institutions like banks and brokerage houses etc. who made these loans that are not being paid back.
2007-08-12 02:02:09 · answer #1 · answered by The Scorpion 6 · 1⤊ 0⤋
Sub-prime actually refers to real estate. A sub-prime loan is one in which the borrower has a poor credit score and couldn't qualify for a conventional loan. The higher rates and low down payments make defaults more likely. The sub-prime crises is that those borrowers are now defaulting on their loans at a much higher rate.
The reason this effects the stock market is that mortgage companies are now faced with large losses. And all financial companies that buy mortgage loan packages are suffering as well. It is a global problem because foreign institutions buy our mortgages just like they buy bonds.
2007-08-12 01:10:18 · answer #2 · answered by Mystery 6 · 1⤊ 0⤋
The market composed of really shoddy loans.
2007-08-11 22:50:17 · answer #3 · answered by Peter N 1 · 0⤊ 0⤋
2 and 3 gave good answers and deserve a point
2007-08-12 03:28:00 · answer #4 · answered by mister ed 7 · 0⤊ 0⤋