Publication: The Sub Prime Crisis : Implications for Emerging Markets
Date
2008-09
ISSN
Published
2008-09
Author(s)
Gwinner, William B.
Sanders, Anthony
Abstract
This paper discusses some of the key
characteristics of the U.S. subprime mortgage boom and bust,
contrasts them with characteristics of emerging mortgage
markets, and makes recommendations for emerging market
policy makers. The crisis has raised questions in the minds
of many as to the wisdom of extending mortgage lending to
low and moderate income households. It is important to note,
however, that prior to the growth of subprime lending in the
1990s, U.S. mortgage markets already reached low and
moderate-income households without taking large risks or
suffering large losses. In contrast, in most emerging
markets, mortgage finance is a luxury good, restricted to
upper income households. As policy makers in emerging market
seek to move lenders down market, they should adopt policies
that include a variety of financing methods and should allow
for rental or purchase as a function of the financial
capacity of the household. Securitization remains a useful
tool when developed in the context of well-aligned
incentives and oversight. It is possible to extend mortgage
lending down market without repeating the mistakes of the
subprime boom and bust.
Citation
“Gwinner, William B.; Sanders, Anthony. 2008. The Sub Prime Crisis : Implications for Emerging Markets. Policy Research Working Paper No. 4726. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/929d453c-b763-5119-85f3-464006199a2f License: CC BY 3.0 IGO.”
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