Which U.S. housing-market problem was central to the 2007–2009 financial crisis?

The subprime mortgage crisis was central to the 2007–2009 financial crisis.

Subprime mortgages were loans made to borrowers with weaker credit histories or other characteristics associated with higher default risk. During the housing boom, lenders issued many such loans, and financial institutions bundled mortgages into securities that were sold to investors around the world.

When U.S. house prices stopped rising and began falling, delinquencies and foreclosures increased. Mortgage-backed securities lost value, financial firms faced heavy losses, and credit markets seized up. The resulting stress contributed to the failure or rescue of major institutions and a deep global recession.

The crisis had several interacting causes, including excessive leverage, poor risk assessment, complex securitization, and inadequate regulation. It is narrower than the term “global financial crisis,” which includes the broader market and banking turmoil that followed.