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Lesson 6

We will build on our knowledge about mortgages and how they have affected homeownership by studying the concepts of home mortgages, fixed- and adjustable-rate mortgages, and subprime mortgages.

Lesson Goals

  • Can I understand home mortgage-related concepts such as fixed and adjustable rates and subprime mortgages?

  • Can I analyze the claims and supporting evidence presented in informational videos and texts about the subprime mortgage crisis and its relationship to the US housing industry?

Texts

Optional

  • Digital Access
    • Sections 1–6 from “How Mortgages Work,” Lee Ann Obringer and Dave Roos, HowStuffWorks, 2002
    • “The Crisis of Credit Visualized,” Jonathon Jarvis, YouTube, 2011
    • “Witness the Impact of the Global Financial Crisis of 2007–08,” Encyclopædia Britannica, Encyclopædia Britannica, 2014

Materials

Tools

Question Sets

Editable Google Docs

Activity 1: Read – Write – Discuss

We will read an excerpt from “How Mortgages Work” to learn about how the history of lending in the United States made homeownership more likely but also led up to the financial crisis of 2008.

Individually, prepare for a class discussion by reading and annotating the first three sections of "How Mortgages Work" from HowStuffWorks while considering the following questions:

  1. What are mortgages, and how do lenders like banks set up a mortgage?

  2. What can happen if a borrower fails to make payments on a mortgage loan?

  3. What are the two main types of mortgages, and how do they differ?

  4. How did the creation of the FHA in 1934 change the availability of mortgages for Americans?

  5. What does the article suggest happens when bad loans are coupled with a bad economy? What impact did this have on homeownership in the US after 2007?

Write responses to these questions in your Learning Log and share your responses in a class discussion.

Activity 2: Read – Write

We will work in reading teams to analyze and share information from informational articles about three types of mortgages: fixed-rate, adjustable-rate, and subprime.

Join a reading team with two other students.

Delegate the reading and analysis of the following digital access articles about types of mortgages to the members of your reading team:

  • Fixed-Rate Mortgages section (p. 5) from “How Mortgages Work”

  • Adjustable-Rate Mortgages section (p. 6) from “How Mortgages Work”

  • "Witness the Impact of the Global Financial Crisis of 2007–08"

Read and analyze your article, considering the following guiding questions:

  1. How does the type of mortgage you read about work?

  2. What are the advantages and disadvantages of this type of mortgage for a borrower?

  3. What impact might the widespread use of this type of mortgage have had on homeownership in the US?

Activity 3: Discuss

In our reading groups, we will compare our responses to the guiding questions. Then we will report what we learned about these three types of mortgages in order to better understand how mortgages impact homeownership in the us.

In your reading group, summarize your responses to the guiding questions. Begin by explaining the type of mortgage you read about, and then discuss the advantages, disadvantages, and potential impacts of that type of mortgage on homeownership in the US.

As a group, develop a claim that summarizes and compares the three types of mortgages. Provide evidence from all three texts to support your summary claim.

Share, explain, and discuss your group’s claim with the rest of the class, developing some conclusions about the impacts of mortgages on homeownership in the US.

Activity 4: View – Discuss – Listen

In preparation for a lesson focused on the subprime mortgage crisis, we will view and discuss an informational video titled “Witness The Impact Of The Global Financial Crisis Of 2007–08.”

View the video and consider the following question:

  1. How did changes in the US housing market trigger the world financial crisis of 2008?

Discuss what you learned about the financial crisis and its connection to the US housing market.

Activity 5: View – Discuss

In preparation for a lesson focused on the subprime mortgage crisis, we will view an informational video titled “The Crisis Of Credit Visualized” to further develop our understanding of the causes and effects of the subprime mortgage crisis in the United States and its impact on homeownership.

View the video and consider the following questions:

  1. How does what I learn in the video expand my understanding of the subprime mortgage crisis?

  2. What new questions does the video raise for me?

In a class discussion, compare your responses to the video.

Activity 6: Write

We will reinforce our understanding of key terms related to mortgages and the home lending process.

Based on what you have learned from your reading of "How Mortgages Work," your discussions with your reading group, and the video you watched, write down the following key terms in your Vocabulary Journal, and write a definition for each in your own words. You might use the Vocabulary in Context Tool for words you can decipher from the text; for others, you might use morphology to decipher the meaning, or a reference resource to check if your meaning is accurate.

  • mortgage

  • debt

  • foreclosure

  • amortization

  • equity

  • interest rate

  • fixed-rate mortgage

  • adjustable-rate mortgages

  • subprime mortgage

  • subprime mortgage crisis (Great Recession, housing bubble)