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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

Presentation on Background on the Subprime Mortgage Crisis

Richard W. Peach

Senior Vice President

Federal Reserve Bank of New York

December 9, 2008

overview
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.
slide7

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

slide8

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

slide9

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

slide10

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.

slide12

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.

slide14

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.

slide15

90+ Day Delinquencies

Subtitle Text

Percent

Percent

Actual

Predicted

X-Axis Text

Contact Person Text

Source: MBA & Author's Calculations

Note Text

slide16

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

slide17

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

slide20

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.

slide23

Note: Series plotted on left axis unless otherwise indicated *The percent of total loans that falls into specified category

Source: FirstAmerican CoreLogic LoanPerformance

slide24

Source: FirstAmerican CoreLogic LoanPerformance

Note: Series plotted on left axis unless otherwise indicated