Subprimes, overconfidence Follow

The subprime mortgage financial crisis of 2007 was a sharp rise in home foreclosures which started in the United States during the fall of 2006 and has become a global financial crisis within a year. The root of the crisis started with lending of subprime mortgages. In contrast to prime mortgages in which the loan is given based on the income and credit of the borrower, subprime mortgages are issued based primarily on the value of the house with the income and credit of the borrower. As long as housing prices continued to increase, sub-prime borrowers were able to borrow more and more money with the ability to cash out these loans. However, once housing prices started to drop, a large fraction of these loans quickly became bad.