From the Report
The collapse of the U.S. housing market, the world’s largest debt market, is the defining economic event of our lifetimes.
This presentation explores what happened and why, where we are today, and what the future likely holds.
For the Second Half of the 20thCentury, Housing Was a Stable Investment
…And Then Housing Prices Exploded
Prices Exploded Because the Borrowing Power of a Typical Home Purchaser More Than Tripled from 2000-2006
Americans Have Borrowed Heavily Against Their Homes Such That the Percentage of Equity Has Fallen Below 50% for the First Time
Housing Became Unaffordable in Many Areas Using a Typical 30-Year Fixed-Rate Mortgage, Which Led Many Borrowers to Take Exotic Mortgages
There Was a Dramatic Decline in Mortgage Lending Standards from 2001 through 2006
Why Did It Happen?
Among the Many Causes of The Great Housing Bubble, Two Stand Out
The lenders making crazy loans didn’t care if the homeowner ended up defaulting
The entire system –real estate agents, appraisers, mortgage lenders, banks, Wall St. firms and rating agencies –became corrupted by the vast amounts of quick money to be made
The Enormous Amounts of Money to Be Made Corrupted Our Financial System
Deregulation of the Financial Sector Led to a Surge of Compensation, Leverage and Profits
Wall Street Firms Were Making a Fortune Securitizing Loans
Mortgages Were Pooled into RMBSs, Tranches of Which Were Pooled into CDOs
The Rating Agencies Were Making a Fortune Rating Structured Finance Products
Two Waves of Losses Are Behind Us… But Three Are Looming…
See the report below…