Yuliya Demyanyk and Otto Van Hemert estimate the mortgage problems at the end of 2005 (
Understanding the Subprime Mortgage Crisis). They find basically that deterioration of mortgage underwriting (higher LTV, ARMs as opposed to fixed income securities, interest-only loans), and find that credit standards deteriorated significantly over the prior 5 years. But I think they really bury the lead, which is that they estimate a doubling of default rates as of the end of 2005 for the next year's new mortgages. Even if I knew that to be true, I would not have anticipated the crisis we observed.
Agreed about the default rates. You wouldn't think that 4% of loans in default and 7%-9% late would cause this mess unless there were other structural problems.
ReplyDeleteAgreed about the default rates. You wouldn't think that 4% of loans in default and 7%-9% late would cause this mess unless there were other structural problems.
ReplyDeleteAgreed about the default rates. You wouldn't think that 4% of loans in default and 7%-9% late would cause this mess unless there were other structural problems.
ReplyDeleteAgreed about the default rates. You wouldn't think that 4% of loans in default and 7%-9% late would cause this mess unless there were other structural problems.
ReplyDeleteAgreed about the default rates. You wouldn't think that 4% of loans in default and 7%-9% late would cause this mess unless there were other structural problems.
ReplyDeleteAgreed about the default rates. You wouldn't think that 4% of loans in default and 7%-9% late would cause this mess unless there were other structural problems.
ReplyDelete