How did the correction started? What is subprime loan?

Many traders all over the worl might be asking this question to themselves about how this mess started and why all of a sudden such a huge correction occurred in US and world markets, the reason is over confidence and poor understanding of credit markets among US hedge funds, Banks and even credit rating companies like S&P and MOODY's.
A senior executive of a credit rating company in US in 2006 looked at the 6lac plus loans given in that year and saw that around more than 50% loans given not even a single person gave its first installment, this was a big jolt to the rating company and they decided to downgrade their ratings from tiple AAA to double BB which means not suitable for retail investing or long term investing.
This downgradation led to panic among traders and made a selloff this year.
Many other reasons were behind this.In 2006 falling interest rates and rising housing rates led to over confidence among big money lenders and they started giving loans to people with bad credit ratings and even to those who didnt had any documents, showing the over confidence among the banks and private lenders that the subprime borrowers will payback the principle amount within the time duration, which didnt happened,forget about principle amount, most of them didnt even pay their first installment.
This was the starting of a big fall in the worlds strongest economy called USA.
Soon a fall in housing rates happened which led to big panic among home owners and for those especially who have taken loans to invest in new housing areas,these people decided to backoff from paying off their debts and which led to liquidity crunch among banks and private lenders, and eventually led to filing of bankruptcy.
The situation can even go worse as the rumour of US's big mortgage company Countrywide might file for bankruptcy, if confirmed.

God save USA and the World markets.