Together we're gonna lump sub prime and
alt a into a category that we're going to call nonprime.
Nonprime mortgages, they're not new products around for
a while, but they exploded in the 2000's.
Here's a picture.
You see that the line is giving the subprime share of the entire market and
that's labeled along the line.
So in 1996 the subprime share of the market,
this is just subprime, it does not include Alt-A.
The subprime share of the market was 9.5% and it stayed relatively steady
even dipping slightly over the next seven years before starting to grow rapidly.
And in the period from 2003 to 2006,
we see it grow from 8.3% of the market to 23.5% of the market.
And this is a time where the market itself is growing rapidly.
So the total amount in dollars of subprime loans, that's the height of the bars.
And the height of those bars show that the total amount was
below $100 million dollars a year, 1996 and 1997.
Growing to about $200 billion in 2002, and then really exploding,
reaching the peak above $600 billion in 2005,
before falling off dramatically in 2007 and 2008.
Those bars are split into two different groups.
And this is something that we will talk more about in future modules,
which is the difference between securitized and non-securitized loans.
The most important thing to note here is that the majority of the growth
from 2003 to 2007 was in securitized subprime loans.
The subprime loans would be made by the banks and then bundled into securities and
sold to investors.
It was an enormous growth, and it plays a large role both in popular narratives and
in the reality of what went in the lead up to the financial crisis.
[MUSIC]