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Mark Smith
Documentary Movie: Inside Job
1) What happened to the U.S. real estate market? What is the reason for that to
happen?
From 2001 to 2007, home purchases and housing prices skyrocketed. In 2007, housing
prices dropped dramatically. In addition to these events, predatory lending practices with
subprime loans helped create a housing bubble. Homebuyers were borrowing more than 90% of
the home’s value and were unable to pay their mortgages. In the old system for buying a home,
the person wanting to buy the home would get a loan from a local lender and would pay their
mortgage to that lender every month. Lenders were very careful with who they were loaning
money to because mortgages took decades to repay and they wanted to get their money back.
The new system of securitization led to riskier lending practices because insurance companies
would be on the hook if the loan wasn’t repaid. The mortgage crisis was caused by the inability
of a large number of home owners to pay their mortgages as their low introductory-rate
