Misguided Mortgages and the Great Recession.

• Author: Van Doren, Peter
• Position: Working Papers - Report - Brief article

"Mortgage-Backed Securities and the Financial Crisis of 2008: A Post Mortem," by Juan Ospina and Harald Uhlig. April 2018. NBER #24509.

This September marks the 10th anniversary of the collapse of Lehman Brothers, arguably the watershed event of last decade's financial crisis sparked by a collapse in residential real estate. The standard explanation for the crisis blames "loose" lending standards by mortgage originators, particularly for lower-income borrowers, combined with the repackaging of mortgages into securities sold to investors falsely informed by misguided AAA ratings.

In previous Working Papers columns (Spring 2011, Fall 2012, and Spring 2014) i described papers that challenge the lowerincome-borrowers portion of this narrative. This paper examines the other portion, asking how large were the investment losses on AAA-rated non-governmental mortgage-backed securities.

Ospina and Uhlig examine all non-agency residential mortgage-backed securities (RMBS) issued between 1987 and 2008. They find that the...