Due to the increased demand for homes and other property over the last five years, lenders sought to find ways to increase the number of real estate loans they gave out. The problem in the subprime mortgage sector came about because of loans that were made to people who were not well qualified to receive such a loan. What then happened was that they began to default on these loans almost en masse.
With the investment banks not properly considering the level of risk that exists in a subprime loan and a rising mortgage rate scenario, what happened seemed inevitable.
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