Understanding the subprime mortgage crisis

Yuliya Demyanyk and Otto van Hemert
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Otto van Hemert: https://www.man.com/otto-van-hemert

No 2007-05, Supervisory Policy Analysis Working Papers from Federal Reserve Bank of St. Louis

Abstract: We analyze the subprime mortgage crisis: an unusually large fraction of subprime mortgages originated in 2006 being delinquent or in foreclosure only months later. We utilize a loan-level database, covering about half of all US subprime mortgages, and identify two major causes. First, over the past five years, high loan-to-value borrowers increasingly became high-risk borrowers, in terms of elevated delinquency and foreclosure rates. Lenders were aware of this and adjusted mortgage rates accordingly over time. Second, the below-average house price appreciation in 2006-2007 further contributed to the crisis.

Keywords: Subprime mortgage; Mortgage loans (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-rmg and nep-ure
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Citations: View citations in EconPapers (34)

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