In order to satisfy this demand the mortgaging and lending companies in the started to offer housing loans and mortgages to the market. The market targeted by them also pertained to the sub prime market which has led to the increase in bad debts faced by the banks, financial as well as the lending institutions.
Moreover the failure in the housing and mortgage sector is trickling down on other credit and lease based sectors where the consumers are not able to make the9or payments resulting in a US wide problem for credit companies and banks. “Like sub prime mortgages, many prime loans made in recent years allowed borrowers to pay less initially and face higher adjustable payments a few years later. As long as home prices were rising, borrowers on these terms could refinance their loans or sell their properties to pay off their mortgages. Although the rise in prime delinquencies is less severe than the one in the sub prime market, with prices falling and lenders clamping down, homeowners with solid credit are starting to come under the same financial stress as those with sub prime credit.” (Bajaj & Story, 2008)