The evolution of the subprime mortgage market

By S. Chomsisengphet, A. Pennington-Cross. 2006

268 citations recorded by the source corpus.

This paper describes subprime lending in the mortgage market and how it has evolved through time. Subprime lending has introduced a substantial amount of risk-based pricing into the mortgage market by creating a myriad of prices and product choices largely determined by borrower credit history (mortgage and rental payments, foreclosures and bankruptcies, and overall credit scores) and down payment requirements. Although subprime lending still differs from prime lending in many ways, much of the growth (at least in the securitized portion of the market) has come in the least-risky (A-) segment of the market. In addition, lenders have imposed prepayment penalties to extend the duration of loans and required larger down payments to lower their credit risk exposure from high-risk loans.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f2160a7e9ac7d8cf2dfa29dec26620845bd8e6b9

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Citations in the corpus

The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis (2009, unknown): “While we do not have data on mortgage level interest rates, Chomsisengphet and Pennington-Cross (2006) show that the subprime-prime mortgage spread for 30-year fixed mortgages dropped from 225 basis points to historical lows of 175 basis points from 2001 to 2004.”
The equilibrium effect of fundamentals on house prices and rents (2013, background): “Chomsisengphet and Pennington-Cross (2006) document similar trends in the subprime lending markets. response of landlords is effectively to sell housing to their tenants, and they are willing to do this because the house price has risen while the rent has remained virtually constant.28 Table 3…”
The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis (2008, unknown): “For example, Chomsisengphet and Pennington-Cross (2006) show that the subprime mortgage spread for 30-year fixed rate mortgages drops sharply from 2001 to 2004.”
The Credit Ratings Game (2012, unknown): “�two(�) V 0 � ( 1 2 �R 1 + � I 1) + ( 1 2 �R 2 + � I 2) ( 10 )”
From New Deal Institutions to Capital Markets: Commercial Consumer Risk Scores and the Making of Subprime Mortgage Finance (2009, background): “For one example of this kind of work by Federal Reserve researchers see (Chomsisengphet & Pennington-Cross, 2006), which traces the ‘evolution of the subprime mortgage market’ by the recording the volume of loan origination by score, but not the origins of the technical practices that sustain these…”
Bank Branch Presence and Access to Credit in Low-to-Moderate Income Neighborhoods (2010, unknown): “Those mortgages can be originated by distant lenders who base their decisions on the downpayment amount and the credit score (Chomsisengphet and Pennington-Cross, 2006).”
Cities Destroyed (Again) For Cash: Forum on the U.S. Foreclosure Crisis (2008, background): “As the expansion of the market proceeded after 2001, lenders targeted new borrower segments and new geographies (Chomsisengphet and Pennington-Cross, 2006).”
Accounting in and for the Subprime Crisis (2008, unknown): “11 See Chomsisengphet and Pennington-Cross (2006). 12 T2 Partners LLC (2008) indicates it is short Ambac and MBIA stock and has purchased credit derivatives on these firms.”
Negative Equity and Foreclosure: Theory and Evidence (2008, unknown): “These include a measure of the borrower’s equity in the home, which is a linear combination of the initial LTV ratio and cumulative house price appreciation since the time of purchase [equation (1)], unemployment rates at the town level from the Bureau of Labor Statistics (BLS), the contemporaneous ”
The Panic of 2007 (2008, background): “See Chomsisengphet and Pennington-Cross (2006, 2007) and Greenspan and Kennedy (2005, 2007).”
Smart Money? The Effect of Education on Financial Outcomes (2014, unknown): “For example, Chomsisengphet and Pennington-Cross (2006) document how a 20-point difference in credit score can affect both the cost and availability of certain home mortgage products.”
Financial Regulation and Securitization: Evidence from Subprime Loans (2009, unknown): “To compare magnitudes across the two types of lenders, we estimate the complete equation (2) in column (5).”
Cartographies of Race and Class: Mapping the Class‐Monopoly Rents of American Subprime Mortgage Capital (2009, background): “Put simply, after controlling for consumer qualifications, the subprime world is flat (Berkovec et al., 1994; Ambrose et al., 2000; Chomsisengphet and Pennington-Cross 2006; c.f. Friedman, 2007).”
The Failure of Models that Predict Failure: Distance, Incentives and Defaults (2010, unknown): “By assumption, (5) and (6) are both satisfied.”