how come people lost their homes and became homeless due to the lehman failure
The collapse of Lehman Brothers in 2008 triggered a global financial crisis that led to a severe economic recession. This crisis had far-reaching effects on many parts of the economy, including the housing market. Many individuals lost their homes and became homeless due to the Lehman failure for the following reasons:
1. Subprime mortgages: Banks, including Lehman Brothers, were heavily invested in subprime mortgages - loans given to individuals with poor credit histories. When these loans began to default, the housing market crashed.
2. Foreclosures: As a result of the housing market crash, many individuals were unable to pay their mortgage payments, and their homes went into foreclosure.
3. Unemployment: The recession that followed the Lehman collapse led to high levels of unemployment. Many people lost their jobs and were unable to make their mortgage payments, further exacerbating the foreclosure crisis.
4. Financial instability: The financial crisis and the resulting instability made it difficult for people to access credit or refinance their homes, making it hard for them to avoid foreclosure.
In summary, the collapse of Lehman Brothers contributed significantly to the housing crisis and the subsequent wave of foreclosures, which led to many people losing their homes and becoming homeless.
The collapse of Lehman Brothers in September 2008 triggered a global financial crisis that had far-reaching effects on individuals and the economy. Here's a step-by-step breakdown of how people lost their homes and became homeless due to the Lehman failure:
1. Housing bubble and subprime lending: In the years leading up to the crisis, there was a housing bubble, particularly in the United States. Some financial institutions irresponsibly offered subprime mortgages to individuals with poor credit or insufficient income, leading to a surge in home ownership.
2. Securitization and mortgage-backed securities (MBS): To make profits from the subprime mortgages, banks bundled them together and sold them as mortgage-backed securities. These securities were attractive to investors seeking high returns.
3. Lack of regulation: The financial industry was operating with minimal oversight and regulations, enabling the unchecked growth of risky lending practices and complex financial products. This lack of regulation allowed Lehman Brothers and other financial institutions to engage in high-risk activities.
4. Lehman Brothers bankruptcy: On September 15, 2008, Lehman Brothers filed for bankruptcy, which was the largest bankruptcy in U.S. history. The collapse sent shockwaves throughout the financial system, leading to a severe decline in confidence and a freeze in lending among banks.
5. Economic downturn: The bankruptcy of Lehman Brothers triggered a financial crisis, which in turn caused a significant economic downturn. Stock markets crashed, businesses went bankrupt, and widespread job losses followed. The housing market collapsed, causing property values to plummet.
6. Foreclosures and evictions: As the economy deteriorated, many people lost their jobs and struggled to make mortgage payments. With declining property values, some homeowners found themselves in a situation where they owed more on their mortgages than their homes were worth. Consequently, many were unable to refinance or sell their homes, leading to widespread foreclosures and evictions.
7. Homelessness: As homeowners faced foreclosure and eviction, many were left with no alternative housing options. This resulted in an increase in homelessness as individuals and families lost their homes due to financial difficulties stemming from the collapse of Lehman Brothers.
It is important to note that the Lehman Brothers failure was just one aspect of the broader financial crisis, and numerous interconnected factors contributed to the overall impact on people's homes and livelihoods.