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Working Paper
The rise in mortgage defaults
Pence, Karen M.; Mayer, Christopher J.; Sherlund, Shane M. (2008)
The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different ...
Finance and Economics Discussion Series , Paper 2008-59

Journal Article
Spotlight: Texas subprime mortgages: metros vary on risky loans--and delinquencies
Kumar, Anil; Di, Wenhua (2009-01)
The current financial crisis has brought a severe decline in subprime mortgage lending. Like the nation, Texas and its metros still have exposure to existing loans. Housing prices, unemployment and overall economic activity will play a significant part in determining how many of them run into trouble.
Southwest Economy , Issue Q1 , Pages 7

Working Paper
The depth of negative equity and mortgage default decisions
Shan, Hui; Bhutta, Neil; Dokko, Jane K. (2010)
A central question in the literature on mortgage default is at what point underwater homeowners walk away from their homes even if they can afford to pay. We study borrowers from Arizona, California, Florida, and Nevada who purchased homes in 2006 using non-prime mortgages with 100 percent financing. Almost 80 percent of these borrowers default by the end of the observation period in September 2009. After distinguishing between defaults induced by job losses and other income shocks from those induced purely by negative equity, we find that the median borrower does not strategically default ...
Finance and Economics Discussion Series , Paper 2010-35

Conference Paper
Housing, housing finance, and monetary policy: a symposium sponsored by the Federal Reserve Bank of Kansas City: concluding remarks
Feldstein, Martin (2007)
Proceedings - Economic Policy Symposium - Jackson Hole

Journal Article
Did credit scores predict the subprime crisis?
Demyanyk, Yuliya (2008-10)
One would think that credit scores would be a predictor of who would default on a subprime mortgage. But that doesn't seem to be the case.
The Regional Economist , Issue Oct , Pages 12-13

Working Paper
Mortgage contract choice in subprime mortgage markets
Hwang, Min; Elliehausen, Gregory E. (2010)
The boom in the subprime mortgage market yielded many loans with high LTV ratios. From a large proprietary database on subprime mortgages, we find that choice of mortgage rate type is not linear in loan sizes. A fixed rate mortgage contract is a popular choice when loan size, measured by LTV ratio, is small. As LTV ratio increases, borrowers become more likely to choose adjustable rate mortgage contracts. However, when LTV reaches a certain level, borrowers start to switch back to fixed rate contracts. For these high LTV loans, fixed rate mortgages dominate borrowers' choices. We present a ...
Finance and Economics Discussion Series , Paper 2010-53

Journal Article
Making a difference in Chicago neighborhoods
Riley, Mary Fran; Gorey, Rochelle Nawrocki (2003-01)
Started almost 30 years ago by housing advocates to improve declining Chicago neighborhoods. Neighborhood Housing Services of Chicago (NHS) has into one of the most succesful and respected organizations of its kind in the U.S. A key to its sucess has been the ability to enlist the support of both neighborhood residents and to corporate, lending, and regulatory and political leaders in efforts to revitalize city neighborhoods. These relationships have allowed it to craft innovative homeownership opportunities for working families while responsibly leveraging public and private sector ...
Profitwise , Issue Wint

Working Paper
The subprime crisis: Is government housing policy to blame?
Brevoort, Kenneth P.; Avery, Robert B. (2011)
A growing literature suggests that housing policy, embodied by the Community Reinvestment Act (CRA) and the affordable housing goals of the government sponsored enterprises, may have caused the subprime crisis. The conclusions drawn in this literature, for the most part, have been based on associations between aggregated national trends. In this paper we examine more directly whether these programs were associated with worse outcomes in the mortgage market, including delinquency rates and measures of loan quality. We rely on two empirical approaches. In the first approach, which focuses on ...
Finance and Economics Discussion Series , Paper 2011-36

Working Paper
Did prepayments sustain the subprime market?
Bhardwaj, Geetesh; Sengupta, Rajdeep (2008)
This paper demonstrates that the reason for widespread default of mortgages in the subprime market was a sudden reversal in the house price appreciation of the early 2000's. Using loan-level data on subprime mortgages, we observe that the majority of subprime loans were hybrid adjustable rate mortgages, designed to impose substantial financial burden on reset to the fully indexed rate. In a regime of rising house prices, a financially distressed borrower could avoid default by prepaying the loan and our results indicate that subprime mortgages originated between 1998 and 2005 had extremely ...
Working Papers , Paper 2008-039

Journal Article
Subprime Mortgage Performance by Metro Area
Di, Wenhua (2008)
Dallas-Fort Worth-Arlington and Houston-Sugar Land-Baytown lead the state with the most securitized, owner-occupied subprime mortgages. These two metros also have a much larger number of problematic loans compared with other Texas metros.
e-Perspectives , Volume 8 , Issue 2

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