Understanding the Subprime Mortgage Crisis

  title={Understanding the Subprime Mortgage Crisis},
  author={Yuliya Demyanyk and Otto van Hemert},
  journal={Banking \& Financial Institutions},
Using loan-level data, we analyze the quality of subprime mortgage loans by adjusting their performance for differences in borrower characteristics, loan characteristics, and macroeconomic conditions. We find that the quality of loans deteriorated for six consecutive years before the crisis and that securitizers were, to some extent, aware of it. We provide evidence that the rise and fall of the subprime mortgage market follows a classic lending boom-bust scenario, in which unsustainable growth… 
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