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Presentation on Background on the Subprime Mortgage Crisis

Presentation on Background on the Subprime Mortgage Crisis Richard W. Peach Senior Vice President Federal Reserve Bank of New York December 9, 2008 Overview To get a better understanding of the subprime mortgage crisis it is useful to:

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Presentation on Background on the Subprime Mortgage Crisis

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  1. Presentation on Background on the Subprime Mortgage Crisis Richard W. Peach Senior Vice President Federal Reserve Bank of New York December 9, 2008

  2. Overview • To get a better understanding of the subprime mortgage crisis it is useful to: • Consider the structure of the US housing finance system and the innovations in that system over the past decade. • Look at developments in the housing market and in mortgage loan performance from a regional perspective.

  3. Overview of U.S. Housing Finance System

  4. Mortgage Originations by Loan Type(billions of dollars) Source: Inside Mortgage Finance

  5. Risk Factors by Loan Type

  6. Household Mortgage Debt Securitization Subtitle Text Percent of Total Debt Percent of Total Debt Total GSE Private Label X-Axis Text Contact Person Text Source: Board of Governors, Flow of Funds Accounts Note: Shading represents NBER recessions. Note Text

  7. Housing Starts per 1,000 People Subtitle Text Starts per 1,000 people Starts per 1,000 people Total U.S. CA, AZ, NV, FL All Other States 25 year average X-Axis Text Contact Person Text Source: Census Bureau and Economy.com Note: Shading represents NBER recessions. Note Text

  8. Housing Completions Subtitle Text Thousands Thousands Start of Current Forecast Difference: 1.7 million Difference: -1.7 million April Forecast X-Axis Text Note: Trend demand for housing completions based on current population growth and 250,000 units per year of replacement demand. Shading represents NBER recessions. Contact Person Text Source: Census Bureau

  9. Home Price Indexes 2000 Q1 = 100 Index Index Conventional Mortgage Home Price Index OFHEO Home Price Index Case-Shiller Home Price Index Census Constant Quality Home Price Index Median Price of Existing 1-Family Homes Sold Median Prices of New Homes Sold Source: U.S. Census, National Association of Realtors, Freddie Mac, Office of Federal Housing Enterprise Oversight and Standard and Poors. X-Axis Text Contact Person Text Note: Shading represents NBER recessions.

  10. 90+ Day Delinquencies and FHFA Price Index Subtitle Text Percent % Change - Year to Year FHFA House Price Index (right axis) 90+ Day Delinquencies, Percent of all Loans (left axis) X-Axis Text Contact Person Text Source: Mortgage Banker’s Association and FHFA Note: Shading represents NBER recessions.

  11. All Loans: Serious Delinquencies By State (SA) Subtitle Text Percent Percent Michigan Ohio Florida California X-Axis Text Contact Person Text Source: Mortgage Bankers Association Note: Shading represents NBER recessions.

  12. 90+ Day Delinquencies Subtitle Text Percent Percent Actual Predicted X-Axis Text Contact Person Text Source: MBA & Author's Calculations Note Text

  13. Homeowner Vacancy and Prices Subtitle Text Percent % Change - Year to Year Real Constant Quality Home Price Index (Right Axis) Vacancy Rate (Left Axis) X-Axis Text Contact Person Text Source: Census Bureau

  14. Measures of Excess Supply of Housing Subtitle Text Thousands Thousands Start of Forecast Based on vacant units relative to estimate of equilibrium vacancies X-Axis Text Note: Red line based on construction data; blue line based on vacant homes relative to their equilibrium rate. Shading represents NBER recessions. Contact Person Text Source: Census Bureau

  15. Reference Charts

  16. Ratio of Owners' Equivalent Rent to OFHEO Home Price Index Subtitle Text Index: 1984Q1=100 Index: 1984Q1=100 Owners' Equivalent Rent to OFHEO Index(left axis) Reference: S&P 500 Dividend Yield(right axis) X-Axis Text Contact Person Text Source: BEA, OFHEO, Census Bureau and S&P Note: Shading represents NBER recessions.

  17. Note: Series plotted on left axis unless otherwise indicated *The percent of total loans that falls into specified category Source: FirstAmerican CoreLogic LoanPerformance

  18. Source: FirstAmerican CoreLogic LoanPerformance Note: Series plotted on left axis unless otherwise indicated

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