The financial crisis of 2008 started with the bursting of the housing bubble. Sub-prime mortgages bundled into bonds put banks around the world at risk when home foreclosures started to happen like domino’s. Fortunately, the Federal Housing Administration (FHA) insures certain types of mortgages. The 2008 Housing Market Crash and How Insurance Helped provides examples of what to do in case of a future crises.
The FHA slowly lost market share as the beginning of the housing bubble took off and lenders were more interested in the larger monetary gains of risky mortgages. However, post-bubble the FHA has backed as high as 40% of mortgages most that do not meet the 20% minimum down payment requirements. The ways mortgage insurance has helped include:
- Allowing middle-class families to still afford to own a home
- Limiting the impacts of the housing crash itself
- Preventing a second collapse in the economy
- The profits of current books of business should outweigh the losses incurred during the crisis
- Their lending activity helped fill in the gaps left by private mortgage companies
Learning more about the 2008 Housing Market Crash and How Insurance Helped mitigate the crisis can help us plan better for the future. It might even help us prevent a future housing bubble from wreaking havoc with worldwide impacts.