In 2007, the real estate bubble began to burst with home values declining and people left owing more than the value of their home. Since mortgage loans had been sold on the subprime market, a borrower didn’t have the opportunity to work with their bank on a solution, and some just walked away from their home and the mortgage debt.
Institutions that owned the mortgages, found themselves in debt as the loans lost value. Financial institutions were so interconnected that when one failed, it brought down others. The failures threatened to destroy the two big government-sponsored loan agencies Fannie Mae and Freddie Mac. A federal takeover saved these two institutions. As financial institutions failed, the stock market declined and the damage spread to all industries and workers were laid off, increasing the inability to pay mortgages.
In 2009, the effects of the recession leveled off, in part encouraged by a stimulus bill to encourage government spending to offset the slowdown in priva