Dan Immergluck

 

On his book Foreclosed: High-Risk Lending, Deregulation, and the Undermining of America’s Mortgage Market

Cover Interview of June 24, 2009

In a nutshell

Foreclosed describes the evolution of U.S. mortgage markets from the early twentieth century through to the subprime crisis of the late 2000s.  The book details the highly mixed-economy nature of these markets, and how heavily shaped they have been by public policy.  I argue that the successful and stable mortgage markets of the past involved an active role for the federal government both as regulator and as an investor.  Actions, since the early 1980s, to reduce regulations and to connect global capital markets more directly to homeowners – with little public-sector supervision or involvement – were at the root of the subprime and high-risk loan debacle.

Foreclosed explains both the mechanics of securitized mortgage markets and the political economy that helped connect global capital markets much more closely, and with little mediation or supervision, to homes and neighborhoods – often with disastrous effects.  It concludes with an extensive discussion of how policy could help fundamentally restructure mortgage markets to provide for sound, risk-limiting and fair housing finance.

The book describes the evolution and fundamental problems of private-label securitization and the dual regulatory system that resulted in higher-risk lending being less regulated than lower-risk, plain-vanilla mortgage markets.  To correct the misperception that there was just one boom in subprime mortgages that began after 2000, I document the history of two recent high-risk lending booms.  The first high-risk lending boom, in the late 1990s, occurred primarily in the refinance and home equity markets; the second began after 2001 and involved both home purchase and refinance loans.