Perspectives on the Subprime Mortgage Market

30 Pages Posted: 12 Dec 2007 Last revised: 11 Oct 2008

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Tong Li

Milken Institute

Triphon Phumiwasana

Milken Institute

Glenn Yago

Milken Institute

Date Written: January 1, 2008

Abstract

This paper consists of four short pieces on the subprime mortgage market. Based upon a proprietary database, LoanPerformance, of 80 million mortgage loans originated from January 1999 to July 2007, these pieces demonstrate: (1) the subprime loan market has contributed to a net gain in homeownership; (2) the distinction between subprime and prime borrowers cannot be easily made on the basis of FICO scores and the wide variety of products used by subprime borrowers are also used by prime borrowers; and (3) foreclosures on subprime mortgage loans that are fixed-rate, variable-rate, and hybrids with interest-rate resets are already a serious problem, which means that while hybrids may exacerbate mortgage problems if interest rates reset upwards in 2008 and 2009, the product itself is not the cause of those problems.

Keywords: Subprime, mortgage, homeownership, foreclosures, hybrid, ARM, FRM

JEL Classification: E2, E3, E6, G1, G2, G21,

Suggested Citation

Barth, James R. and Li, Tong and Phumiwasana, Triphon and Yago, Glenn, Perspectives on the Subprime Mortgage Market (January 1, 2008). Available at SSRN: https://ssrn.com/abstract=1070404 or http://dx.doi.org/10.2139/ssrn.1070404

James R. Barth

Auburn University ( email )

415 West Magnolia Avenue
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Milken Institute ( email )

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Tong Li (Contact Author)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States
310-570-4655 (Phone)
310-570-4625 (Fax)

Triphon Phumiwasana

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States
310-998-2697 (Phone)

HOME PAGE: http://www.milkeninstitute.org

Glenn Yago

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

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