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Implications of the Housing Market Bubble for Sustainable Homeownership

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

33 Pages Posted: 3 Nov 2010  

Paul Calem

Board of Governors of the Federal Reserve System

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Susan M. Wachter

University of Pennsylvania - Wharton School, Department of Real Estate ; University of Pennsylvania - Finance Department

Date Written: November 2, 2010

Abstract

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.

Keywords: Mortgage, High Risk Mortgage, High Risk Lending, Securitization, Risk Transfer, Housing Bubble

JEL Classification: G21, G24, K20

Suggested Citation

Calem, Paul and Nakamura, Leonard I. and Wachter, Susan M., Implications of the Housing Market Bubble for Sustainable Homeownership (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. Available at SSRN: https://ssrn.com/abstract=1701661

Paul Calem

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3804 (Phone)
215-574-4364 (Fax)

Susan M. Wachter (Contact Author)

University of Pennsylvania - Wharton School, Department of Real Estate ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6330
United States
215-898-6355 (Phone)

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

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