The great American housing bubble : what went wrong and how we can protect ourselves in the future / Adam J. Levitin, Susan M. Wachter.

Format:

Book

Author/Creator:

Levitin, Adam Jeremiah, author.

Wachter, Susan M., author.

Language:

English

Subjects (All):

Freddie Mac (Firm).

Federal National Mortgage Association.

Mortgage loans--United States--History.

Mortgage loans.

Housing--United States--Finance--History.

Housing.

Global Financial Crisis, 2008-2009.

Housing--Finance.

Finance.

History.

United States.

Genre:

History.

Physical Description:

xix, 380 pages : illustrations ; 25 cm

Place of Publication:

Cambridge, Massachusetts : Harvard University Press, 2020.

Summary:

"The American housing bubble of the 2000s caused the worst global financial crisis since the Great Depression. In this definitive account, Adam Levitin and Susan Wachter pinpoint its source: the shift in mortgage financing from securitization by Fannie Mae and Freddie Mac to "private-label securitization" by Wall Street banks. This change set off a race to the bottom in mortgage underwriting standards, as banks competed in laxity to gain market share. The Great American Housing Bubble tells the story of the transformation of mortgage lending from a dysfunctional, local affair, featuring short-term, interest-only "bullet" loans, to a robust, national market based around the thirty-year fixed-rate mortgage, a uniquely American innovation that served as the foundation for the middle class. Levitin and Wachter show how Fannie and Freddie's market power kept risk in check until 2003, when mortgage financing shifted sharply to private-label securitization, as lenders looked for a way to sustain lending volume following an unprecedented refinancing wave. Private-label securitization brought a return of bullet loans, which had lower initial payments-enabling borrowers to borrow more-but much greater back-loaded risks. These loans produced a vast oversupply of underpriced mortgage finance that drove up home prices unsustainably. When the bubble burst, it set off a destructive downward spiral of home prices and foreclosures. Levitin and Wachter propose a rebuild of the housing finance system that ensures the widespread availability of the thirty-year fixed-rate mortgage, while preventing underwriting competition and shifting risk away from the public to private investors"-- Provided by publisher.

Contents:

Introduction: In praise of homeownership

Housing finance before the New Deal

The New Deal mortgage

The rise of securitization

The boom and the bubble

The bubble bursts

Timing the bubble

Demand or supply?

Theories of the bubble

The securitization daisy chain

Information failure

Post-crisis reforms and developments

Principles for reform

Meet Franny Meg.

Notes:

Includes bibliographical references and index.

ISBN:

9780674979659

0674979656

OCLC:

1119989158