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The Market Structure of Securitisation and the US Housing Bubble

Published online by Cambridge University Press:  01 January 2020

Susan Wachter
Susan Wachter
Affiliation:
University of Pennsylvania
Corresponding
E-mail address:
wachter@wharton.upenn.edu
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Abstract

Housing finance and, specifically, the subprime private label securitisation market in the US, was at the epicentre of the global financial crisis. Excessive debt expansion in the run-up to the crisis resulted in credit risk, under-identified and mispriced ex ante, and in systemic risk. This paper considers the role of financial innovation in debt markets and the changing market structure of securitisation in the evolution of the US housing price bubble. New financing vehicles contributed to growing risk, but the more salient factor was the change in the structure of securitisation, which led to unsustainable levels of debt.

Keywords

mortgage securitisation credit risk housing bubble housing finance E44 G01 G2 G28
Type
Research Articles
Information
National Institute Economic Review , Volume 230 , November 2014 , pp. R34 - R44
Copyright
Copyright © 2014 National Institute of Economic and Social Research

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Footnotes

The author acknowledges the assistance from the Research Sponsors Program of the Zell/Lurie Real Estate Center at Wharton.

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