Your Name :Sent to :Purpose :MM /DD /YY :Subprime Mortgage Crisis : The Impact on the New Lending Procedures Introduction Thesis Statement Subprime mortgages have opened the door of opportunity to those individuals with low income and who are not capable of providing their down payment . However , the new lending system has caused strict risk assessment policies and procedures in aims of controlling risk consequences . Over the last decade , subprime mortgage lending has transformed itself from a small fraction of home equity lending to a market valued at over 200 billion annual sales accounting to 10 of the overall single-family residential mortgage market (Retsinas and Belsky 138 . According to Badlock , Manning and Vickerstaff (2007 , the practical knowledge involved in mortgage business is investing on areas that possess higher surplus profits , which means investment-load relationship should provide higher profit returns (528 . In subprime lending , the cost of the credit is higher than those offered in prime mortgages , or loans that do not actually comply with the Fannie Mae or Freddie Mac guidelines . Contrary to the rule-based credit rationing system that served only those borrowers with blemished or no credit history , subprime lending has accepted the risks in exchange for higher lending interests (Retsinas and Belsky 141 . However , due to the risky situation of the lending policy , these are now being under the risk of increasing delinquent market . Mortgage institutions are now implementing strict risk assessments to counteract possible jeopardizing activities (e .g .incapacitated borrowers , risks of loans , etc . However , with the higher-risk borrower market availing subprime mortgages than prime borrowers , foreclosure activities have increased dramatically and eventually compromising the previous mortgage sale value – such phenomenon sums the conditions of subprime mortgage crisis . During the discussion , we explore the possible impact of this crisis to the lending policies and the general industry , especially on their risk assessments and handling of both prime and subprime borrowers .Discussion Mortgage History : Problems of Mortgage Lending in the Past During the 1930s and 1940s , the standard practice being implemented in mortgage lending , sometimes called constant amortization loan , requires only a substantial down payment of 50 of the other half is to be paid for five maximum years . According to Brueggemen and Fisher (2004 , these period of mortgage lending can be simplified by their distinct relationships , particularly (1 ) mortgage loans are risky and only for relatively wealthy individuals (2 ) lenders tend to consider the borrower ‘s ability to pay (e .g . assessed through income category , debt history , etc ) and not entirely the collateral value , and (3 ) loans can be renewed or called after five years . If economic conditions are unfavorable , the lender can require the borrower to repay the full loan balance (Brueggemen and Fisher 74 . The calculations only involve (1 ) the 50 opening balance (2 ) the interest (3 ) amortization and (4 ) the monthly payment . After the great economic depression in the United States , different amortizing loans were introduced to the market . According to Brueggemen and Fisher (2004 , the economic prosperity manifested by (1 ) increase in employment (2…