Wednesday, October 5, 2011

Review Of Research On Securitization Causing The Mortgage Crisis

From Federal Reserve Bank of Atlanta, Real Estate Research, "The uncertain case against mortgage securitization" by Ryan Bubb, assistant professor at the New York University School of Law, and Alex Kaufman, economist with the Board of Governors of the Federal Reserve System:
In this post we report on the latest round in an ongoing academic debate over this issue [Did mortgage securitization cause the mortgage crisis?]. We recently released two papers, available here and here, in which we argue that the evidence against securitization that many have found most damning has in fact been misinterpreted. Rather than being a settled issue, we believe securitization's role in the crisis remains an open and pressing question.
Our findings, of course, do not settle the question of whether securitization caused the crisis. Rather, they show that the [620 credit score] cutoff rule evidence does not resolve the question in the affirmative but instead points a bit in the opposite direction. Credit score cutoffs demonstrate that large securitizers like Fannie Mae and Freddie Mac were able to successfully impose their desired underwriting standards on banks. We hope our work causes researchers and policymakers to reevaluate their views on mortgage securitization and leads eventually to a conclusive answer.
Read the full article here.

1 comment :

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