What Is The Credit Crunch?

That mortgage industry is going through a tough period of defaults which has led to a credit crunch. You’ve probably already heard or read about that, but what exactly is a credit crunch? Well, the crunch comes from the lack of availability of liquidity. Most of the mortgage lenders you use or hear on advertising sell their loans on an investment market known as the secondary market. They use the money received to make more loans and sell those and so on and so on. With the subprime disaster, the investment market is lacking for buyers. The investors view mortgages as a bad investment, so lenders are unable to sell most of their loans. This, of course, means they don’t have money to lend out. Thus, a credit crunch.