 Just the facts: An initial analysis of subprime's role in the housing crisisChristopher Foote, Kristopher Gerardi, Lorenz Goette and Paul Willen Journal of Housing Economics, 2008, vol. 17, issue 4, 291-305 Abstract: Using two large proprietary datasets from New England, this paper establishes some basic facts about the subprime crisis. First, while unaffordable interest-rate resets are often blamed for setting off this crisis, most subprime borrowers who defaulted did so well in advance of their reset dates. Defaults on subprime adjustable-rate mortgages are more sensitive to declining housing prices than are defaults on fixed-rate loans, however, and the data support a number of alternative explanations for this finding. Second, many borrowers with good credit scores took out subprime loans as the housing boom gathered steam. It is hard to construct a prima facie case that these borrowers were inappropriately steered into the subprime market, however, because the loans that these borrowers took out were too risky for prime treatment. Finally, 70% of Massachusetts homes recently lost to foreclosure were originally purchased with prime mortgages. But subprime refinancing is especially prevalent among owners who were likely to have extracted substantial amounts of equity before they defaulted. Keywords: Mortgage; Subprime; Crisis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:17:y:2008:i:4:p:291-305 Access Statistics for this article Journal of Housing Economics is currently edited by H. O. Pollakowski More articles in Journal of Housing Economics from Elsevier |
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