The Market Structure of Securitisation and the US Housing Bubble

24 Pages Posted: 11 Oct 2014 Last revised: 8 May 2015

See all articles by Susan M. Wachter

Susan M. Wachter

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

Date Written: October 9, 2014

Abstract

Housing finance, and, specifically, the subprime private label securitisation market in the US, was at the epicentre of the global financial crisis. Excessive debt expansion in the run-up to the crisis resulted in credit risk, under-identified and mispriced ex ante, and in systemic risk. This paper considers the role of financial innovation in debt markets and the changing market structure of securitisation in the evolution of the US housing price bubble. New financing vehicles contributed to growing risk, but the more salient factor was the change in the structure of securitisation, which led to unsustainable levels of debt.

Keywords: mortgage securitisation, credit risk, housing bubble, housing finance

JEL Classification: E44, G01, G2, G28

Suggested Citation

Wachter, Susan M., The Market Structure of Securitisation and the US Housing Bubble (October 9, 2014). Available at SSRN: https://ssrn.com/abstract=2508030 or http://dx.doi.org/10.2139/ssrn.2508030

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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