What Was the Timeline of the 2008 Mortgage Crisis?
Home prices peaked in July 2006, subprime lenders failed in 2007, Lehman collapsed in September 2008, and prices bottomed in February 2012, about 27% lower.
The 2008 mortgage crisis unfolded over about six years. U.S. home prices peaked in July 2006, subprime lenders began failing in early 2007, credit markets froze in August 2007, and the worst failures and rescues came in September and October 2008, led by the Fannie Mae and Freddie Mac takeover, Lehman Brothers' bankruptcy, and the AIG rescue. The recession ran from December 2007 to June 2009, Congress passed the Dodd-Frank Act in July 2010, and national home prices did not stop falling until February 2012, about 27% below their peak.
The tables below give each event's date and why it mattered. For why these events happened, see what caused the 2008 mortgage crisis.
2003 to 2006: How did the housing boom peak?
| Date | Event | Why it mattered |
|---|---|---|
| Mid-2003 to mid-2004 | The Federal Reserve holds its benchmark short-term rate near 1% | Cheap credit and rising prices drew in borrowers and lenders |
| 2003 to 2005 | Subprime loans grow from 8% to 20% of new mortgages | More loans went to borrowers with weak credit, about 70% of them on loans with low introductory rates for two or three years, followed by periodic rate and payment changes |
| January 2006 | Housing starts peak at an annual pace of 2.27 million, more than a 30-year high | Builders added supply just as demand was about to fall |
| Mid-2006 | The Fed's rate reaches 5.25% after two years of increases | Adjustable-rate payments rose at reset, and refinancing got harder |
| July 2006 | The S&P Cotality Case-Shiller national home price index peaks | Borrowers who needed rising values to refinance or sell lost that option |
2007: When did subprime lenders fail and credit freeze?
| Date | Event | Why it mattered |
|---|---|---|
| February 27, 2007 | Freddie Mac says it will stop buying the riskiest subprime mortgages and securities | A major buyer stepped back from the subprime market |
| April 2, 2007 | New Century Financial, a large subprime lender, files for bankruptcy | One of the largest subprime lenders failed after its funding dried up |
| June 7, 2007 | Bear Stearns suspends investor withdrawals at a hedge fund heavily invested in mortgage securities | Showed that losses had reached Wall Street firms; the funds were liquidated July 31 |
| August 6, 2007 | American Home Mortgage files for bankruptcy | Another large mortgage lender failed four months after New Century |
| August 9, 2007 | BNP Paribas, France's largest bank, halts withdrawals from three funds it could not value | Marked the start of a freeze in short-term lending between banks |
| December 2007 | The recession begins; the Fed creates the Term Auction Facility on December 12 to lend to banks | The housing bust became an economy-wide downturn |
2008: What were the major rescues and collapses?
| Date | Event | Why it mattered |
|---|---|---|
| January 11, 2008 | Bank of America agrees to buy Countrywide Financial, the largest mortgage lender | The biggest lender survived only through a sale |
| March 14 to 24, 2008 | JPMorgan Chase agrees to buy Bear Stearns; the Fed approves financing for the deal | First rescue of a major Wall Street investment bank |
| July 11, 2008 | Regulators close IndyMac Bank | The largest failure of a savings institution (thrift) to that date |
| July 30, 2008 | The Housing and Economic Recovery Act (HERA) becomes law | Created a new regulator for Fannie Mae and Freddie Mac with power to take them over |
| September 6, 2008 | Fannie Mae and Freddie Mac are placed in government conservatorship | The two companies, which held or guaranteed more than half of U.S. mortgages, could not survive on their own |
| September 15, 2008 | Lehman Brothers files for bankruptcy | The government let a major investment bank fail, and panic spread |
| September 16, 2008 | The Fed lends up to $85 billion to AIG; a large money market fund falls below $1 per share | AIG had insured mortgage securities it could not pay on; investors pulled $349 billion within a week from prime money market funds, which held short-term debt from banks and other companies |
| September 25, 2008 | Regulators close Washington Mutual and sell its banking operations to JPMorgan Chase | The largest bank failure in U.S. history |
| October 3, 2008 | Congress passes the Emergency Economic Stabilization Act, creating the $700 billion Troubled Asset Relief Program (TARP) | Gave Treasury funds to stabilize the financial system, including by buying shares in banks |
| November 23, 2008 | Treasury, the Fed, and the FDIC announce guarantees, liquidity, and capital for Citigroup | Rescue of one of the largest U.S. banks |
| December 16, 2008 | The Fed cuts its benchmark rate to a range of 0% to 0.25% | With rates near zero, the Fed relied on large-scale bond purchases, announced on November 25, 2008 |
Did Fannie Mae and Freddie Mac cause the 2008 mortgage crisis explains the September 6 conservatorship and where the two companies stand now. The mortgage securities and collateralized debt obligations (CDOs) that differ from mortgage-backed securities are the assets behind the AIG and Lehman losses.
2009 to 2014: When did relief and reform arrive?
| Date | Event | Why it mattered |
|---|---|---|
| February 17, 2009 | The American Recovery and Reinvestment Act becomes law | Federal stimulus spending and tax cuts to support the economy |
| February 18, 2009 | The Homeowner Affordability and Stability Plan is announced, including a $75 billion loan modification initiative | Aimed to lower monthly payments for homeowners at risk of foreclosure |
| March 2009 | Treasury issues loan modification guidelines (March 4), and the Home Affordable Refinance Program (HARP) starts | HARP let borrowers with little or no equity refinance Fannie Mae and Freddie Mac loans; it ran through December 31, 2018 |
| June 2009 | The recession ends after 18 months | The deepest recession since World War II, with inflation-adjusted output down about 4.0% from its second-quarter 2008 peak to its second-quarter 2009 low |
| October 2009 | Unemployment peaks at 10.0% | More than double its level before the recession |
| July 21, 2010 | The Dodd-Frank Wall Street Reform and Consumer Protection Act becomes law | Set new rules for large financial firms and mortgage lending |
| January 2011 | The Financial Crisis Inquiry Commission issues its report | Concluded the crisis was avoidable |
| February 2012 | National home prices hit bottom | About 27% below the July 2006 peak |
| January 10, 2014 | The ability-to-repay rule for mortgages takes effect | Lenders must verify income and qualify borrowers at the full payment, not a teaser rate |
How the United States recovered from the 2008 crisis covers these programs and their results in detail.
How long did the crisis last?
The answer depends on what you measure:
- Recession: 18 months, from December 2007 to June 2009.
- Home prices: fell for about 5.5 years, from July 2006 to February 2012. The national index did not regain its 2006 peak until January 2017, about 10.5 years after the peak.
- Financial panic: most intense from September 2008 into early 2009.
- Foreclosures: the share of homes entering foreclosure fell back to pre-recession levels by mid-2013.
The effects of the 2008 mortgage crisis covers what these years cost homeowners, renters, and workers.
Sources
- The Financial Crisis: A Timeline of Events and Policy Actions (Federal Reserve Bank of St. Louis (FRASER))
- History of Fannie Mae and Freddie Mac Conservatorships (Federal Housing Finance Agency)
- Real Gross Domestic Product (GDPC1) (U.S. Bureau of Economic Analysis, via FRED)
- The Great Recession and Its Aftermath (Federal Reserve History)
- The Financial Crisis Inquiry Report (January 2011) (Financial Crisis Inquiry Commission, via FRASER)
- S&P Cotality Case-Shiller U.S. National Home Price Index (CSUSHPINSA) (Federal Reserve Bank of St. Louis (FRED))
- Federal Funds Effective Rate (FEDFUNDS) (Federal Reserve Bank of St. Louis (FRED))
- Unemployment Rate (UNRATE) (U.S. Bureau of Labor Statistics, via FRED)
- Refi Plus/Home Affordable Refinance Program (HARP) program sheet (Fannie Mae, via FDIC Affordable Mortgage Lending Guide)
- Public Law 111-203, Dodd-Frank Wall Street Reform and Consumer Protection Act (U.S. Government Publishing Office)
- Subprime Mortgage Crisis, 2007-2010 (Federal Reserve History)
- Ability-to-Repay Rule: Protecting Homebuyers from Debt Traps (Consumer Financial Protection Bureau)
Financial Disclaimer: Tellus provides this content for informational purposes only. This is not financial advice. Financial returns and mortgage terms vary based on individual circumstances and market conditions. Consult a qualified financial advisor before making financial or borrowing decisions.
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