Even as financial crisis took shape, traditional financial institutions were not left unaffected and thus the lending. The boom in innovative financial products proceeded hand-in-hand with more complexity. The situation multiplied the actors linked to a single mortgage including specialized originators, mortgage brokers, managing agents & trading desks, securitizers & their due diligence firms, insurances, investors and providers of rope financing. With indirect access of underlying assets, the actors depended more on unconfirmed information including FICO scores on appraisals, creditworthiness, and due diligence checks via third party firms and more significantly the rating agencies & risk management desks computer models. Rather than spreading risks, that offered the ground for misjudgments, fraudulent acts and finally leading to collapsing of market.
Certain financial innovations facilitated organizations to circumvent regulations such as financing of off-balance sheet that affects the capital cushion or leverage as reported by key banks. Several scholars argued that the lack of transparency on exposure of banks’ risk limited markets from pricing risks correctly prior to the crisis. That led the mortgage market to grow bigger than it actually could have done. Hence, the financial crisis became more disruptive that it actually would be if risk levels could have been disclosed in a precise and readily understandable format. The affected institutions have witnessed traditional lending services becoming more expensive for ordinary borrowers who find it worthy seeking for financial help from alternative lenders.
Due to various reasons, participants in the market did not precisely measure the risks associated with financial innovation such as CDOs and MBS or comprehend its influence on the entire stability within the financial structure. Equities First is a company of great team that takes pride in offering stock-based loans to fund and help potential investors with businesses or individuals in need of working capitals. The company website http://www.equitiesfirst.co.uk and upon contacting the customer care departments, you will get more of the details.