Friday, July 22, 2011

UNDERSTANDING THE SUBPRIME MORTGAGE CRISIS

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Understanding the
Subprime Mortgage Crisis


Yuliya S. Demyanyk 


Federal Reserve Bank of Cleveland

Otto Van Hemert 


New York University (NYU) - Department of Finance


December 5, 2008

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.
Number of Pages in PDF File: 40
Keywords: mortgage, subprime, delinquency, foreclosure
JEL Classifications: D12, G12, G21
Working Paper Series

Date posted: October 10, 2007 ; Last revised: June 20, 2009

Suggested Citation

Demyanyk, Yuliya S. and Van Hemert, Otto, Understanding the Subprime Mortgage Crisis (December 5, 2008). Available at SSRN: http://ssrn.com/abstract=1020396

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Contact Information

Yuliya Demyanyk
Federal Reserve Bank of Cleveland ( email )
Research Department
East 6th & Superior 
Cleveland, OH 44101-1387
United States
HOME PAGE: http://www.clevelandfed.org/Research/Economists/Demyanyk
Otto Van Hemert (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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