Why were financial institutions and rating agencies not able to forecast the performance of the loans?
Subprime loans originated between 2000 and 2005 did evidence a predictable pattern. Borrowers generally kept their loans current for one year or more after origination, so performance in the early years at least was considered low risk, especially when coupled with the view that even if there were a default, the collateral value would more than offset the loan balance. This all began to change in 2006, when anecdotal evidence now suggests that weaker borrowers began to enter the market in growing numbers at the same time that real estate prices started to decline.[i] From 2006 on, predicting the performance of subprime loans became much less reliable.
Related Questions
- I received a Satisfactory/Meets Expectations performance rating on my last evaluation. How can I make sure I receive at least a Satisfactory/Meets Expectations for FY 2009?
- Are agencies and employees able to make comments or suggestions about the new Performance Management Process?
- How do agencies account for employee performance from April 2008 - September 2008?
