Implications of the Housing Market Bubble for Sustainable Homeownership
Board of Governors of the Federal Reserve System
Leonard I. Nakamura
Federal Reserve Bank of Philadelphia
Susan M. Wachter
University of Pennsylvania - Wharton School, Department of Real Estate
November 2, 2010
THE AMERICAN MORTGAGE SYSTEM: RETHINK AND REFORM, Susan Wachter and Marty Smith, eds., University of Pennsylvania Press, Forthcoming
U of Penn, Inst for Law & Econ Research Paper No. 10-27
This paper presents evidence on the impact of the housing bubble, flood of high risk mortgage lending, and subsequent meltdown in homeownership. We point to agency and information problems in the mortgage origination and securitization market; incomplete risk transfer; and underassessment of systemic risk. These factors and their relationship to exaggerated house price dynamics and excessive volatility undermine the objective of sustainable homeownership. This requires attention from policymakers, including a need for improved financial and regulatory data.
Number of Pages in PDF File: 33
Keywords: Mortgage, High Risk Mortgage, High Risk Lending, Securitization, Risk Transfer, Housing Bubble
JEL Classification: G21, G24, K20
Date posted: November 3, 2010
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