A contributing cause of the Great Recession was the Subprime Mortgage Crisis of 2007-2009, which is marked by a rather sudden increase in foreclosures. This project will investigate possible causes of the Subprime mortgage crisis. Using regression analysis we see that the housing price index (HPI) is a very good indicator for foreclosure rates. Therefore, in order to predict future HPI values and thus future foreclosure rates auto-regressive model with the use of the Yule-Walker equations will be implemented. Furthermore, we will model the behavior of accounts with the development of a Markov Chain, which may be used as a form of a credit risk model.