Borrowers who found themselves unable to escape higher monthly payments by refinancing began to default. As more borrowers stopped making their mortgage payments, foreclosures and the supply of homes for sale increased. This placed downward pressure on housing prices, which further lowered homeowners' equity.

The subprime mortgage crisis led to a drastic impact on the U.S. housing market and overall economy. It lowered construction activity, reduced wealth and consumer spending, and decreased the ability for financial markets to lend or raise money.

Subprime refers to borrowers with a poor credit history or none at all. Subprime loans carry higher interest rates to make up for the greater risk that subprime borrowers are assumed to pose.

The nature of the housing bubble in both the U.S. and Europe indicates U.S. housing policies were not a primary cause. Deregulation, excess regulation, and failed regulation by the federal government have all been blamed for the late-2000s (decade) subprime mortgage crisis in the United States.