Research Reports, 2010

The menace of the subprime crisis in the United States started at the beginning of
2007, when more than 100 mortgage-lending companies went bankrupt. The crisis has been considered the worst financial catastrophe since the Great Depression. Its effect has led to a sharp contraction in global trade and caused a worldwide recession. The crisis was triggered by a skyrocketing rise in delinquencies and foreclosures in subprime mortgages, which refer to a type of mortgage both targeting borrowers with low credit ratings and possessing a higher interest rate than characterizes the normal ‘prime rate’.1