Housing Bubble and Subprime Mortgage Expansion

Prosperity Pulse Decoding Financial Frequencies · Nov 13, 2025 · 13m

In the early 2000s, housing prices rose dramatically as banks relaxed lending standards and created new mortgage products that allowed borrowers with poor credit to purchase homes. This episode traces the emergence of subprime mortgages—loans to borrowers with weak credit histories—and how these mortgages became increasingly common as housing prices rose. We examine the role of mortgage brokers in originating subprime loans, analyzing how compensation structures created incentives to maximize loan volume regardless of borrower quality. The episode explores the securitization of mortgages—the…