Mortgage-backed securities (MBS) funded the U.S. housing bubble, while the ensuing bust resulted in systemic risk and the global financial crisis of 2007-09. In the run-up to the crisis, MBS pricing failed to reveal the growing credit risk. This article draws lessons from this failure that could...

This article describes the causes of the boom and bust in the U.S. housing market, which brought down not just the U.S. financial system but the global economy. How did this vicious cycle begin? How did home prices appreciate so far and so fast? Why did rational investors not recognize and stop...

Introduction: In praise of homeownership -- Housing finance before the New Deal -- The New Deal mortgage -- The rise of securitization -- The boom and the bubble -- The bubble bursts -- Timing the bubble -- Demand or supply? -- Theories of the bubble -- The securitization daisy chain --...

Mortgage backed securities (MBS) funded the US housing bubble, while the bust resulted in systemic risk and the Global Financial Crisis. The pricing of MBS and the ABX securitization index failed to reveal growing credit risk. This paper draws lessons from this failure for the use of Credit Risk...