Mortgage loans in USA are the most sought after thing in the US finance industry. Over time it has the not only amass huge amount of money by the sub prime lending but also has contributed to the economy of the USA. This got worse when the Subprime lending default piled up and at certain stage it boomeranged. This resulted in a huge recession of the global economy.

The sum prime crises began in the year 2005-06 with the high default rates on "subprime" and adjustable rate mortgages (ARM). The pursuit of rising housing prices had encouraged borrowers to go for difficult mortgages in the hope to refinance it at more favorable terms. However, things never go as we predict and the worst was near, nobody ever thought in their wildest of the dream that this will happen in reality. But it happened with the housing prices started to drop moderately in 2006-07 in many parts of the U.S. On one hand the refinancing became more difficult on the other hand defaults and foreclosure activities increased dramatically. Home prices failed to rise up as anticipated and ARM interest rates reset higher. Housing properties were subject to foreclosure surged to nearly 75%.

The Economic Stimulus Package Act of 2008

The timely intervention by the US federal reserves by announcing an Economic Stimulus Act of 2008, this made the scenario more placid. It was mainly targeted to secure and assist the low and middle income citizens. It also gave support to the businesses by offering them suitable tax incentives. If we go by the announcements in the stimulus package act it says that all recipients would receive at least $300 and an extra $300 per dependent under the age of 17. The maximum pay that a person would receive would be not more than $600. Individuals who have an annual income over $75,000 are not liable to receive any monetary funds.

The underline variables that govern mortgage loans

There are many types of mortgages but few of them remain same irrespective of any country. They are then put under certain rules and polices of the country. The specific variable which define the mortgages are

• Rate of interest: It is fixed for life, in most cases of the loan, but on certain conditions they can be changed at certain pre defined-periods.

• Duration: mortgage loans quite specifically have a long duration. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date.

• Amount and frequency of the payment: The amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.