In the late 1990s, banks had started taking huge risks. People were buying expensive houses with big loans that they couldn’t afford because of how easy it was to have good credit. It caused the price of homes to rise and also an economic bubble. Because they had a lot of money, loan companies made it easier and easier to get loans, even to those with bad credit. They called them sub-prime loans. Many homeowners during this time refinanced their homes, which changed their mortgages and gave them a lower interest rate. Many of them took out another mortgage on their house and used it for spending money. The companies loaning the money changed their terms so that the borrower would have low interest at first and higher interest later. They called them adjustable-rate mortgages. They often used these initially favorable terms to convince people to take their loans in the first place. Unfortunately, many of the people who accepted were those who also had sub-prime loans. As long as the price of housing was high, investing in sub-prime loans would make the banks and other loan companies a lot of money on top of allowing them to offer even more sub-prime loans. But in response to the economic bubble, the housing companies built too many houses.

However, as Mark explained to her, beginning in the summer of 2006, the price of housing began to fall. The value of many homes dropped below the value of their remaining mortgage debt. Because of this negative equity, the owners were unable to sell them and move. By March of 2008, almost nine million Americans had either zero or negative equity in their homes. When interest rates rose, many homeowners were unable to make the higher payments and so, they defaulted on their loans. Foreclosures were everywhere. People lost their homes. They filed for bankruptcy. The number of houses for sale caused the price of homes to decrease even further. The homeowners who had sub-prime loans were forced to leave properties that were now worth less than they’d originally paid for them. The loans were worth more than the houses themselves. But the loan companies could not make money with those houses. Because the economic housing bubble had collapsed, the value of investments began to fall. The companies that had invested in sub-prime loans lost billions. Several begged for government bailouts. Some of the executives took those bailouts and tried to save themselves by giving themselves million-dollar bonuses. Other companies went entirely out of business. People went from being millionaires to being bankrupt. The financial losses and stock market decline of the 2008 financial crisis had been estimated to be just over 15 trillion dollars. Mark was one of the men who had ridden the wave of that economic bubble, only to be crushed by it.