Issue 1
Sub prime mortgage loan
The immediate and main cause of the current financial crisis is the booming of the United States housing market, which took place between the years 2005-2006 (see appendix 7 form more details).
Failure to pay the “sub prime” was very high, and starts to increase rapidly. Most banks gives borrowers easy facilities and incentives like long-term trend of rising the price of housing which had give borrowers the confidence that they will be able to quickly refinance at an excellent terms.
Refinancing became more difficult after the rise of the interest rates and the drop of the housing prices between 2006-2007.
It is visible that UAE (See appendix 4 for more details) starts to feature financial problems as much as the rest of the world.
The Central Bank in UAE during early eighties implemented a law challenged to limit exposure to the real estate sector. This law stated that banks that are operating in the domestic market would be allowed to lend only 20% domestic deposits for the purchase and development of a land. As a result, new developers in UAE found it very difficult to obtain finance for their new projects as banks are on the edge of Reaching the authorized limit of 20% on funding to real estate.
Consumer behavior is shifting with the current boom and many of the banks wish that this law would reverse. This law still existing but not cancelled; and lenders as a result become more selective.
People in general have ignored the risk involved in taking out loans. Most of them did not prepare a plan to finance their properties, ignoring that the original amount, which was borrowed, would grow by time, which resulted in facing debt problems.

Issue 2

The world financial market was shocked from Dubai’s debt crises, with increasing concern that some UAE banks tighten lending and stall the recovery of global economy.
UAE banks need to feel confident about lending to continue with its economic strength. The troubles that Dubai face caught investors by surprise. And after one year the global crash disrupt the city effecting the growht in ints main investment arm and was seeking six-month delay on repaying its $60 billion debt. The responses from the credit agencies was cutting debt ratings on the state companies of Dubai because they may consider the plan a default.