Understanding the subprime mortgage crisis
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.
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|Date of creation:||2007|
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Econometric Society, vol. 68(2), pages 275-308, March.
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- Campbell, John & Cocco, Joao, 2003.
"Household Risk Management and Optimal Mortgage Choice,"
3157876, Harvard University Department of Economics.
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- Joao Cocco & John Campbell, 2004. "Household Risk Management and Optimal Mortgage Choice," Econometric Society 2004 North American Winter Meetings 646, Econometric Society.
- Joao Cocco & John Campbell, 2004. "Household Risk Management and Optimal Mortgage Choice," Econometric Society 2004 North American Winter Meetings 632, Econometric Society.
- Koijen, Ralph S.J. & Hemert, Otto Van & Nieuwerburgh, Stijn Van, 2009.
Journal of Financial Economics,
Elsevier, vol. 93(2), pages 292-324, August.
- Isabelle Huault & V. Perret & S. Charreire-Petit, 2007. "Management," Post-Print halshs-00337676, HAL.
- von Furstenberg, George M & Green, R Jeffery, 1974. "Home Mortgage Delinquencies: A Cohort Analysis," Journal of Finance, American Finance Association, vol. 29(5), pages 1545-48, December.
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