One of the causes of the 2007-2009 financial crisis was a dramatic decrease in the value of mortgage-backed securities when housing prices began to fall. what does it mean when a financial firm securitizes a mortgage?

Question

Demarion Herman

Business

16 November, 10:53

One of the causes of the 2007-2009 financial crisis was a dramatic decrease in the value of mortgage-backed securities when housing prices began to fall. what does it mean when a financial firm securitizes a mortgage?

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Answers (2)

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Denise · Answer 1

If a financial firm securitizes a mortgage, the seller will bundle parts of the mortgage together and then sells them to various investors. During 2007-2009, they had two bad years of trying to bundle the securities on a mortgage together and sell them to investors. They were selling homes to those who couldn’t actually afford to pay for them and then the investors were also accuring bad debt because payments weren’t being made on the properties.

Princess · Answer 2

For the answer to the question above,

when a financial firm securitizes a mortgage, it means the sellers bundles them together and sells them to the investors.

In those years, they sell a house to an individual even though he can't afford it or they can't pay for it at all. So it will become a bad debt. Then they bundled this mortgages/debt and sells them to the investors. Which cause the collapse of the economy on those years.