Housing Bubbles, Subprime Mortgages and the Financial Crisis Reconsidered
The gulf remains wide between Wallison and his opponents, who refuse to ascribe any blame for the crisis to Freddie Mac, Fannie Mae and other misguided government interventions in mortgage lending. A fair-minded person should at least read Wallison's book before committing wholeheartedly to an opposing narrative.
In his forthcoming book, "Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis and Why It Could Happen Again," Peter Wallison, a scholar at the American Enterprise Institute and former White House counsel to President Reagan, seeks to re-inject the word “mortgage” into the narrative of the 2008 financial crisis. At the center of his narrative are what he calls nontraditional mortgages.
Two decades ago, the major lenders employed mortgage underwriting requirements for collateral, capacity and credit history – the three Cs. Collateral meant that the home buyer made a down payment, preferably of 20 percent or more of the value of the house, never less than 10 percent. Capacity referred to the maximum share of a borrower's income that could be devoted to mortgage payments and other debt service. Credit history meant that the borrower demonstrated an ability to manage credit responsibly, an ability which has come to be summarized in a credit score.
A Challenge for the Fed: Some Overnight Rates Are Falling Below Zero
Christopher Russo