The consequences of mortgage credit expansion
Subtitle: evidence from the 2007 mortgage default crisis
By: Atif Mian, Amir Sufi.
Contributors: Sufi, Amir.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13936; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13936.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We demonstrate that a rapid expansion in the supply of mortgages driven by disintermediation explains a large fraction of recent U.S.  house price appreciation and subsequent mortgage defaults.  We identify the effect of shifts in the supply of mortgage credit by exploiting within-county variation across zip codes that differed in latent demand for mortgages in the mid 1990s.  From 2001 to 2005, high latent demand zip codes experienced large relative decreases in denial rates, increases in mortgages originated, and increases in house price appreciation, despite the fact that these zip codes experienced significantly negative relative income and employment growth over this time period.  These patterns for high latent demand zip codes were driven by a sharp relative increase in the fraction of loans sold by originators shortly after origination, a process which we refer to as "disintermediation." The increase in disintermediation-driven mortgage supply to high latent demand zip codes from 2001 to 2005 led to subsequent large increases in mortgage defaults from 2005 to 2007.  Our results suggest that moral hazard on behalf of originators selling mortgages is a main culprit for the U.S.  mortgage default crisis"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/2/2008.

Includes bibliographical references.

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