This paper examines the role of mortgage supply characteristics in both affordability and financial risk outcomes, in the wake of the mortgage crisis. A hallmark of the crisis was a shift in mortgage lending products, such as interest only, negative amortization or subprime mortgages. What impact did this shift have on consumers, investors and the overall financial system? In an effort to better understand the impact of various products on affordability as well as financial risk outcomes, we address the performance of these products and their interaction with the financial sector in the production of systemic risk. While ex post the performance of these mortgages was disastrous and neither expected nor priced, we also show that ex ante credit risk was mispriced. While it may seem obvious that such instruments allow more borrowing than otherwise would occur in previously affordability and credit score-constrained markets, this may not be the case. In fact we show, that, although the credit box was expanded by these products, this expansion occurred without an increase in homeownership.
Affordable Housing Architecture Asia Borrowing Constraints Canada China Colombia Commercial Brokerage covid-19 CRE Credit Risk Transfers Debt Market Demographics Development e-Commerce Equity Market Ethnic Factors Europe Foreclosures Global Global Financial Crisis hospitality Housing & Residential Housing Supply India inflation Investing land use regulation Macroeconomics Microeconomics Mixed-Use Mobility Mortgage Rates Mortgages Multi-family Non-Traditional Mortgages office sector Political Risk Real Estate Investment Trusts Recession Rental Retail South America Sub-Prime Mortgages Sustainability United States Urban Urbanization work from home