NYU Stern Finance Professor's New Research Shows a Continual Deterioration of Subprime...

NYU Stern Finance Professor's New Research Shows a Continual Deterioration of Subprime Loans Since 2001

Professor to Present Findings at the New York Fed-Princeton
Liquidity Conference on Thursday, December 13
--(Business Wire)--According to a new study by NYU Stern Finance Professor Otto Van
Hemert and Yuliya Demyanyk of the Federal Reserve Bank of St. Louis,
the quality of subprime loans deteriorated year after year from
2001-2006, during the explosive growth of the subprime market. The
decline in quality is revealed by adjusting subprime loan performance
for differences in borrower characteristics, loan characteristics, and
economic circumstances.

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What: Professor Van Hemert and Ms. Yuliya Demyanyk's research
"Understanding the Subprime Mortgage Crisis", is the most
downloaded subprime paper on the Social Science Research
Network (SSRN).

Other
Findings: By using a loan-level database (covering about half of all
US subprime mortgages), Professor Van Hemert and Ms.
Demyanyk find that:

-- High house price appreciation from 2003-2005 masked
the true riskiness of subprime mortgages

-- Securitizers were, to some extent, aware of the
subprime crisis before 2007, as evidenced by their
adjustment of mortgage rate determinants over time

-- This subprime crisis is not confined to resetting
ARMs, but rather a (subprime) market-wide phenomenon
that also affects fixed-rate mortgages

-- The rise and fall of the subprime market resembles a
classic lending boom-bust scenario in which
unsustainable growth leads to the collapse of the
market

When: December 13, 2007, 9:00 a.m.

Where: Federal Reserve Bank of New York, 33 Liberty Street,
New York, NY
12th floor Conference Room
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Professor Van Hemert will be on-site at the conference, and is
available via telephone, to comment on his research and the recent
Presidential, Congressional and Fed subprime proposals. To schedule an
interview, contact Lisette Coviello in NYU Stern's Office of Public
Affairs, 212-998-4033, lcoviell@stern.nyu.edu, or contact Professor
Van Hemert on-site directly at 347-738-3793.

NYU Stern
Lisette Coviello, 212-998-4033
lcoviell@stern.nyu.edu

Copyright Business Wire 2007