Final answer:
The deregulation of the mortgage industry contributed to the housing bubble and subsequent 2010 recession. Defaults on loans and collapse in housing prices led to a financial crisis, bank failures, and a credit freeze that affected many countries globally.
Step-by-step explanation:
The deregulation of the mortgage industry may have been a reason for the housing bubble that caused the recession around 2010. Global financial crisis was the term to describe the period of extreme stress in global financial markets and banking systems between mid 2007 and early 2009. During the crisis, the decline in home prices led to delinquencies and foreclosures, which caused many mortgage lenders to file for bankruptcy as homeowners defaulted on loans. A ripple effect saw the value of mortgage-backed securities collapse, damaging the balance sheets of banks worldwide, which intensified the credit freeze and economic downturn.
The creeping consequences began with signs of distress in 2005 when an oversupply of homes and a spike in delinquent payments became apparent. The resulting drop in house values decreased household wealth, curtailed consumer spending, and harmed financial institutions. The crisis wasn't confined to the U.S.; countries such as Iceland, Ireland, the UK, Spain, Portugal, and Greece experienced similar turmoil. All these factors collectively brought the economy to its knees as credit dried up, leading to widespread economic hardship.