Anatomy of a Train Wreck: Causes of the Mortgage Meltdown
نویسنده
چکیده
Why did the mortgage market melt down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be? It is the thesis of this paper that, in an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s. The decline in mortgage underwriting standards was universally praised as an ‘innovation’ in mortgage lending by regulators, academic specialists, GSEs, and housing activists. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The bubble increased the number of housing speculators with estimates indicating that one quarter of all home sales were speculative sales prior to the bubble bursting. The recent rise in foreclosures is not related to the subprime/prime distinction since both markets had similar size increases in foreclosures that occurred at exactly the same time. Instead, the adjustable-rate/fixed-rate distinction is the key to understanding the rise in foreclosures. This is consistent with speculators turning and running when housing prices stopped rising. It is not consistent with the nasty-subprime-lender hypothesis currently considered to be the cause of the mortgage meltdown.
منابع مشابه
Why the Critics of Poor Health Service Delivery Are the Causes of Poor Service Delivery: A Need to Train the Policy-makers; Comment on “Why and How Is Compassion Necessary to Provide Good Quality Healthcare?”
This comment on Professor Fotaki’s Editorial agrees with her arguments that training health professionals in more compassionate, caring and ethically sound care will have little value unless the system in which they work changes. It argues that for system change to occur, senior management, government members and civil servants themselves need training so that they learn to understand the effec...
متن کاملرهن و وثیقه اسناد براتی در حقوق ایران و انگلیس
Commercial instruments, in particular meaning, or bills are one of the most important means for business parties to enter into transactions. Such instruments are considered as a certain form of property with a great variety of uses. For example, they can be used as a means to pay or to use as a guarantee or security. But a question has always been posed:” whether such instruments can be used ...
متن کاملStatistical Analysis of the Railway Accidents Causes in Iran (TECHNICAL NOTE)
The occurrences of accidents on the railways are inevitable in today’s world and the factors which may cause it, except the atmospheric and accidental ones, are identified and preventable as well. Therefore, these factors can be investigated and useful actions can be performed in order to reduce these accidents. The main impetus of the present research is the statistical analysis of the causes ...
متن کاملBank corporate loan pricing following the subprime crisis
The massive losses that banks incurred with the meltdown of the subprime mortgage market have raised concerns about their ability to continue lending to corporations. We investigate these concerns. We find that firms paid higher loan spreads during the subprime crisis. Importantly, the increase in loan spreads was higher for firms that borrowed from banks that incurred larger losses. These resu...
متن کامل