Of Individual Housing Mortgage Risk

In 2007 the bubble in the US real estate market broke and also the subprime credit crisis, which caused turmoil in the American financial market, such as the stock markets and foreign exchange markets fluctuating dramatically, the commodity price in the US rising remarkably, it also brings the US economy and the whole world's into great decline.This paper investigate deeply into the whole process of US subprime crisis, including the developments and characteristics of American mortgage market, especially in the subprime loan market and its securitization; the financial innovations in the US and different type of financial derivatives. Then this paper begin to analyze the reasons that caused the default rate raising so dramatically and the upcoming financial crisis, most importantly is that the leak in the US financial supervision system, and other reasons including the default in the monetary policy;the bad behavior of financial institutions in the process of debt lending and financial innovations especial the securitization of subprime loan.There are great similarities in China and America's mortgage-backed market, for example the accumulating bubble in the real estate market, the potential risk in China's mortgage market is also accumulating and maybe worse, so we must learn from the lessons the US subprime crisis been given us, and protect our financial system from potential risks such as the default risks of debt borrowers. There are several suggestions given to Chinese financial institutions and also financial supervisors in risk control of residential assets backedloan.