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The Subprime Bubble preceding the Subprime Crisis of 2008 was fueled by risky lending practices, manifesting in the form of a large abrupt increase in the proportion of subprime mortgages issued in the US. This event also coincided with critical slowing down signals associated with instability, which served as evidence of a regime shift or phase transition in the US housing market. Here, we show that the US housing market underwent a regime shift between alternate stable states consistent with the observed critical slowing down signals. We modeled this regime shift on a universal transition path and validated the model by estimating when the bubble burst. Additionally, this model reveals loose monetary policy to be a plausible cause of the phase transition, implying that the bubble might have been deflatable by a timely tightening of monetary policy. [ABSTRACT FROM AUTHOR]

Foreclosure procedures in some states are considerably swifter and less costly for lenders than in others. In light of the foreclosure crisis, an empirical understanding of the effect of foreclosure procedures on the mortgage market is critical. This study finds that lender-favorable foreclosure procedures are associated with more lending activity in the subprime market. The study uses hand-coded state foreclosure law variables to construct a numerical index measuring the favorability of state foreclosure laws to lenders. Mortgage origination data from state-border areas shows that lender-friendly foreclosure is associated with an increase in subprime originations, but has less effect on the prime market. [ABSTRACT FROM AUTHOR]

This article documents that hedge funds specializing in subprime mortgages did not take advantage of the housing bubble and they did not trade against it. Hedge fund capitalization is an important factor regarding how funds suffered during the crisis. Small funds suffered the most. Mid-cap portfolio relied on macroeconomic indicators (subprime foreclosures) and, as a result, suffered less compared to their peers above. Duration and quality of the credit instruments are significant factors in explaining hedge fund returns. Naturally, our study, in line with the existing literature during turbulent periods, documents that the lack of liquidity was a key driver of performance. [ABSTRACT FROM AUTHOR]

This study analyzes the effects of state bankruptcy asset exemptions and foreclosure laws on mortgage default and foreclosure rates across different segments of the mortgage market. We found that the effects of these legal provisions are larger for subprime than for prime mortgages and larger for adjustable rate mortgages than for fixed rate mortgages. These results demonstrate that the effect of variation in bankruptcy exemptions and foreclosure laws is most pronounced in the most risky segments of the mortgage market, which are those that have been most affected by the continuing housing slump in the United States. [ABSTRACT FROM AUTHOR]

The article discusses the use of asset securitization as a financial instrument from the late 2000s through the early 2010s, including in regard to using securities to back subprime mortgages and mortgage loans. The role that covered bonds play in the European securities markets, which are secured by assets of the bond issuer, is discussed. An overview of rating agencies, including their ratings of credit, is provided.

This paper builds a critical geography of poverty finance with recourse to a relational comparison of the microfinance and subprime mortgage markets. It probes paradoxical claims about the nature of poverty, the poor, states and markets that have surfaced in the aftermath of the financial crisis. In doing so it aims to generate new understandings of neoliberal global finance with specific emphasis on 1) the social constitution of risk through racialised and gendered forms of difference; 2) the exercise of dispossession and imperialism by financial means; and 3) articulations of poverty finance with the social relations of debt in specific conjunctures. Each of these terrains of inquiry forms a subsection of the paper, following a preliminary section that poses the animating paradox in more detail. The paper concludes with some reflections on the conditions of possibility for democratising finance. [ABSTRACT FROM AUTHOR]

US subprime mortgage crisis spreads around the whole world through many routes of financial contagion, so considering the characteristics of the US subprime mortgage crisis, we choose macro and market data from 32 economies in 21 quarters before and after this crisis to analyze the index of market linkages (i.e., Copula contagious index) by spatial panel data model. The result finds that the main contagious tunnel of US subprime mortgage crisis is financial tunnel, and international trade tunnel is less important. Besides, risk of liquidity and credit worsen the financial contagion, while competitive currency devaluation is not significant in the crisis. In addition, our analysis shows that the contagion among regional economies is much more significant than that through geography relations. [ABSTRACT FROM AUTHOR]

This paper links the U.S. subprime mortgage crisis to demand-side factors that contributed to the rapid expansion of the U.S. mortgage market. We show that denial rates were relatively lower in areas that experienced faster credit demand growth and that lenders in these high-growth areas attached less weight to applicants' loan-to-income ratios. The results are robust to controlling for supply-side factors, including house price appreciation, mortgage securitization, and other economic fundamentals, and to several robustness tests controlling for endogeneity. The results are consistent with the notion that a relaxation of lending standards, triggered by an increased demand for loans, contributed to the boom and the ensuing crisis, together with other supply-side explanations. These findings shed new light on the relationship between credit booms and financial instability. [ABSTRACT FROM AUTHOR]

In retrospect, the Asian financial crisis was the canary in the coal mine that global leaders failed to recognise. While both the Asian crisis and the current one were the product of excessive leverage, moral hazard and poor risk management, the lessons drawn from each appear to be rather different: the Asian crisis was largely seen as the fault of Asian governments, while the current crisis has been primarily blamed on market actors. Does this mean that we have learned collectively from the mistaken assessments of the previous crisis? Yes and no. After tracing the links between the response to the Asian crisis and the drive towards securitisation, this article suggests that while the international financial community has avoided repeating the first major error that they made after the Asian crisis - by recognising that the problems now lie as much at home as abroad - they continue to make a second and more profound error in their response to the subprime crisis: financial leaders continue to believe that a large part of the solution is to be found in greater transparency, more accurate risk assessment models, better due diligence - in short, to provide the markets with a truly comprehensive picture of the financial instruments that are being traded. I suggest that there are two crucial problems with this assumption. The first is that it is highly unlikely that it will ever be possible to truly calculate and quantify the indeterminacies that are at the heart of the process of securitisation and the originate to distribute (OTD) model. The second is that even if it were possible to develop such a comprehensive picture of the indeterminacies involved in securities markets, it is not at all clear that financial markets will have the capacity or the interest in making effective use of that information. These limits to financial risk management not only raise some serious questions about the kinds of regulatory solutions that are currently being proposed, but also make it all the more important that we develop a politically accountable response. [ABSTRACT FROM AUTHOR]

The paper uses Minsky's Financial Instability Hypothesis as an analytical framework for understanding the subprime mortgage crisis and for introducing adequate reforms to restore economic stability. We argue that the subprime financial turmoil has deeper structural origins that go beyond the housing market and financial markets. We argue that inequality has been the real structural cause of today's financial markets meltdown. What we observe today is only the manifestation of the ingenuity of the market in taking advantage of money-making opportunities at any cost, regardless of macroeconomic and social consequences. The so-called "democratization of homeownership" suddenly turned into record-high delinquencies and foreclosures. The sudden turn in market expectations led investors and banks to reevaluate their portfolios, which brought about a credit crunch and widespread economic instability. The Federal Reserve Bank's intervention came too late and failed to usher adequate regulation. All attempts to stabilize financial markets will be temporary fixes if the structural inequality problem is not adequately addressed. Finally, the paper argues that a true democratization of home-ownership is only possible through job creation and income generation programs, rather than through exotic mortgage schemes. [ABSTRACT FROM AUTHOR]

The author comments on a study on financial liberalization. The author cites the potential costs of financial liberalization, which includes overheating of the economy and increasing asset prices. The author talks about the 2007-2008 sub-prime mortgage financial and credit collapse in the U.S. The author discusses the issue of moral hazard concerning the bailout policy.

The US sub-prime crisis has been a prime revelation of monumental failure by every responsible agent in the market, starting from macroeconomic policy makers, to regulators, to rating agencies, to international standard setting bodies to even the smartest of all investment bankers. This paper aims at identifying the key unpleasant policy challenges that have surfaced in the aftermath of the crisis, while also trying to decipher the sub-prime black box. In the process of documenting the wide ranging and thought provoking post-crisis suggestions from the scattered literature, the paper highlights the gaping fault lines in the existing global financial stability architecture. [ABSTRACT FROM AUTHOR]

The Middle East and North Africa region has experienced a significant amount of activity in the past few years, despite the worldwide economic problems caused by the subprime crisis. A strong influx of petrodollar reserves, sustainable economic growth, limited reliance on leverage, and limited exposure to the global credit markets have kept the region relatively outside the economic mishaps overwhelming a number of economies, especially in the West. Shariah-compliant, Islamic private equity funds and the use of sovereign wealth funds as sources of private equity in the region are two important evolutionary developments to watch in the next few years. © 2008 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]

The article discusses the 2008 financial crisis, examining its causes and suggests solutions to fix the crisis. The author indicates that the lessons learned from the 2007 U.S. subprime crisis might assist China in managing its own society. Topics include government sponsored enterprises (GSEs) which extended credit to high-risk households, the socialization of risk, and financial innovation which allowed for diversification of risk. Also discussed are institutions and incentives that can be structured to promote financial harmony.

The article discusses the success of the Islamic financial model during the global financial crisis of 2008-2009. Analyst Khairul Nizam of the Accounting and Auditing Organisation for Islamic Financial Institutions says that the trading of subprime mortgages is not allowed by Sharia Law. The discussion focuses on the differences between the Islamic financial model and the traditional business model in western society. The origin and history of Islamic finance rules such as the prohibition of "riba" or the interest on loans and accounts, the lack of standardization in financial products, and the profit-and-loss sharing arrangement in Islamic financial markets are mentioned.

The International Monetary Fund ("IMF") estimates that the credit crisis will cost about $945 billion, the latest in a long list of estimates from various sources. While the magnitude of the ultimate cost of the crisis remains uncertain, it will certainly exceed the costs of the last major financial crisis presented by the collapse of the savings and loans industry. This problem began in the subprime mortgage market and then quickly spilled over into other areas of the mortgage industry and the capital markets, culminating in a liquidity and credit crisis which is still unfolding. Unsurprisingly, litigation has been on the rise. This article briefly examines the subprime mortgage-related securities litigation to assess the trends, major players and issues. [ABSTRACT FROM AUTHOR]

Here we seek to spatialise aspects of the Northern Rock Bank crisis of 2007 by marrying two radically different approaches. We combine a discussion of financial lending practices with an articulation of herd behaviour in conditions of uncertainty. Both were part of the still-unfolding picture of a traumatic episode in the geography of finance but also convey lessons on the behaviour of society in situations of shortage. [ABSTRACT FROM AUTHOR]

This article discusses the financial fragility hypothesis developed by Hyman P. Minsky as it effects the U.S. subprime mortgage crisis. Minsky's research indicated that stability in the economy led to investment behaviors that increased economic instability, increasing the risk of financial crisis. Minsky maintained that credit history forms the basis for lending, and these histories tend to look safer while actually becoming riskier during periods of prolonged economic expansion. The subprime crisis is framed as a variation on this issue where banks began to use credit ratings instead of credit histories and develop loan packages for sale to third parties as securities rather than keeping them on their books.

The article discusses a study which examines the Massachusetts history regarding subprime mortgage lending experiences and outcomes to shed light on the debate on whether subprime lending should be regulated by the U.S. credit market. Data covering the 1989-2007 period of cylical downturns in the Massachusetts residential housing market are analyzed, focusing on the factors that relate with loan foreclosures and defaults. Homeowners who were vulnerable to declining house price appreciation were found most likely to default on suprime loan payments.

The article provides information on predatory lending in the U.S. The financial industry states that despite the problems that they have caused, subprime mortgages are still a good thing since the housing market was expanded by extending credit to people who are unable to buy homes. The Center for Responsible Lending (CRL) otherwise mentions that only nine percent of subprime loans made from 1998 to 2006 went to people who were first-time homebuyers. The remaining percentage goes to people who wanted to buy a bigger house or refinance their mortgage. Furthermore, the CRL criticizes the kinds of predatory lending like payday, tax refund and participation, and car title loans which targets low-income people.