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Author:Liu, Haoyang 

Working Paper
Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom

An expansion in mortgage credit to subprime borrowers is widely believed to have been a principal driver of the 2002?06 U.S. house price boom. Contrary to this belief, we show that the house price and subprime booms occurred in different places. Counties with the largest home price appreciation between 2002 and 2006 had the largest declines in the share of purchase mortgages to subprime borrowers. We also document that the expansion in speculative mortgage products and underwriting fraud was not concentrated among subprime borrowers.
FRB Atlanta Working Paper , Paper 2018-10

Discussion Paper
The Paycheck Protection Program Liquidity Facility (PPPLF)

On April 9, 2020, the Federal Reserve announced that it would take additional actions to provide up to $2.3 trillion in loans to support the economy in response to the COVID-19 crisis. Among the measures taken was the establishment of a new facility intended to facilitate lending to small businesses via the Small Business Administration's Paycheck Protection Program (PPP). Under the Paycheck Protection Program Liquidity Facility (PPPLF), Federal Reserve Banks are authorized to supply liquidity to financial institutions participating in the PPP in the form of term financing on a non-recourse ...
Liberty Street Economics , Paper 20200520

Discussion Paper
Optimists and Pessimists in the Housing Market

Given momentum in house prices over business cycles, research on consumer beliefs since the financial crisis has honed in on the potential importance of extrapolative beliefs?myopically assuming trends in asset prices will continue. Extrapolation is frequently cited as a central reason for excessively optimistic expectations about future asset prices, featuring prominently, for example, in the irrational exuberance narrative of Shiller. Other influential work since the Great Recession has emphasized the outsized role that extrapolative optimists can have in bubble formation. In this post, we ...
Liberty Street Economics , Paper 20191016

Discussion Paper
Did Subprime Borrowers Drive the Housing Boom?

The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.
Liberty Street Economics , Paper 20200226

Discussion Paper
Where Have the Paycheck Protection Loans Gone So Far?

The Paycheck Protection Program (PPP) is a central piece of the CARES Act. In the program’s first round, $349 billion in forgivable government-guaranteed loans were extended to small businesses to cover costs related to payroll and utilities, as well as mortgage and rent payments. The program opened for applications on April 3 and was oversubscribed by April 16. Because of its popularity, lawmakers passed a new bill replenishing the fund with another $310 billion and the Small Business Administration (SBA) started approving loans again on April 27. With a new round of PPP lending underway, ...
Liberty Street Economics , Paper 20200506

Working Paper
Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom

An expansion in mortgage credit to subprime borrowers is widely believed to have been a principal driver of the 2002–2006 U.S. house price boom. By contrast, this paper documents a robust, negative correlation between the growth in the share of purchase mortgages to subprime borrowers and house price appreciation at the county-level during this time. Using two different instrumental variables approaches, we also establish causal evidence that house price appreciation lowered the share of purchase loans to subprime borrowers. Further analysis using micro-level credit bureau data shows that ...
Working Papers , Paper 2013

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