Money for Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets

Author/Editor:

Paul S. Mills ; John Kiff

Publication Date:

July 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

After a number of warning signs, the U.S. "subprime mortgage crisis" became a headline issue in February 2007. Notwithstanding the bankruptcy of numerous mortgage companies, historically high delinquencies and foreclosures, and a significant tightening in subprime lending standards, the impact thus far on core U.S. financial institutions has been limited. This paper reviews the history and structure of the subprime market. The results suggest that new origination and funding technology appear to have made the financial system more stable at the expense of undermining the effectiveness of consumer protection regulation. Potential solutions to the management of this trade-off are then explored.

Series:

Working Paper No. 2007/188

Subject:

Credit Housing prices Loans Mortgages Securities

English

Publication Date:

July 1, 2007

ISBN/ISSN:

9781451867527/1018-5941

Stock No:

WPIEA2007188

Pages:

18

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