Cover: The Great American Housing Bubble: What Went Wrong and How We Can Protect Ourselves in the Future, from Harvard University PressCover: The Great American Housing Bubble in HARDCOVER

The Great American Housing Bubble

What Went Wrong and How We Can Protect Ourselves in the Future

Add to Cart

Product Details

HARDCOVER

$45.00 • £36.95 • €40.50

ISBN 9780674979659

Publication Date: 06/09/2020

Text

400 pages

6-1/8 x 9-1/4 inches

64 illus., 5 tables

World

The definitive account of the housing bubble that caused the Great Recession—and earned Wall Street fantastic profits.

The American housing bubble of the 2000s caused the worst global financial crisis since the Great Depression. In this definitive account, Adam Levitin and Susan Wachter pinpoint its source: the shift in mortgage financing from securitization by Fannie Mae and Freddie Mac to “private-label securitization” by Wall Street banks. This change set off a race to the bottom in mortgage underwriting standards, as banks competed in laxity to gain market share.

The Great American Housing Bubble tells the story of the transformation of mortgage lending from a dysfunctional, local affair, featuring short-term, interest-only “bullet” loans, to a robust, national market based around the thirty-year fixed-rate mortgage, a uniquely American innovation that served as the foundation for the middle class.

Levitin and Wachter show how Fannie and Freddie’s market power kept risk in check until 2003, when mortgage financing shifted sharply to private-label securitization, as lenders looked for a way to sustain lending volume following an unprecedented refinancing wave. Private-label securitization brought a return of bullet loans, which had lower initial payments—enabling borrowers to borrow more—but much greater back-loaded risks. These loans produced a vast oversupply of underpriced mortgage finance that drove up home prices unsustainably. When the bubble burst, it set off a destructive downward spiral of home prices and foreclosures.

Levitin and Wachter propose a rebuild of the housing finance system that ensures the widespread availability of the thirty-year fixed-rate mortgage, while preventing underwriting competition and shifting risk away from the public to private investors.

From Our Blog

9780674238084

Who We Might Have Been, and Who We Will Become

Who among us hasn’t considered what our lives would be like if we had taken alternate paths, made different decisions? Storytellers of every stripe write of the lives we didn’t have, says Andrew H. Miller, author of On Not Being Someone Else: Tales of Our Unled Lives. As we live through a worldwide pandemic, the ideas of what might have been are even more appealing. Much like the adolescents on the verge of adulthood in Sally Rooney’s novel Normal People, Miller tells us, we wait to see what comes next.