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tl;dr: the biggest growth of mortgage debt during the housing boom came from those with credit scores in the middle and top of the credit score distribution—and
by pulisse 9y ago
tl;dr: the biggest growth of mortgage debt during the housing boom came from those with credit scores in the middle and top of the credit score distribution—and these borrowers accounted for a disproportionate share of defaults
- DaiPlusPlus 9y agoFTFA: "[according to] a new NBER working paper". Working papers haven't undergone peer-review yet, though I'll concede the NBER probably is in a good position to determine the causes of the crisis.
- lifeisstillgood 9y agoEdit: reread nber paper So the argument seems to be that high credit score individuals with more than one first mortgage (flippers) rose from 20% to 35% in 02-07, and that rise accounts entirely for the excess defaults in 07. It also accounts for the rise in "east" delinquency - people who aren't living in a home are more willing to walk away from it. It's kind of convincing, but I don't think it lets mortgage fraud from lenders off the hook (i.e. Lax enforcement of scoring and approval etc) Basic message is don't give commercial investments the same rights or protections as domestic mortgages - but if you are going to adjust mortgage rules the best ones to focus on are again, fraud by lenders. And of course, reductions in securitisation of opaque assets and the misalignment of incentives of lenders and ... oh we have done this to death. We have not learnt anything.