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

Proceedings, 2009, issue Jan

Abstract: Using loan-level data, we analyze the quality of subprime mortgage loans by adjusting their performance for differences in borrower characteristics, loan characteristics, and macroeconomic conditions. We find that the quality of loans deteriorated for six consecutive years before the crisis and that securitizers were, to some extent, aware of it. We provide evidence that the rise and fall of the subprime mortgage market follows a classic lending boom-bust scenario, in which unsustainable growth leads to the collapse of the market. Problems could have been detected long before the crisis, but they were masked by high house price appreciation between 2003 and 2005.

Date: 2009
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Related works:
Journal Article: Understanding the Subprime Mortgage Crisis (2011)
Working Paper: Understanding the subprime mortgage crisis (2008)
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