Gwinner, William B.Sanders, Anthony2012-06-042012-06-042008-09https://hdl.handle.net/10986/6976This 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.CC BY 3.0 IGOACCOUNTINGACCOUNTING STANDARDSAMORTIZATIONASSET CLASSASSET MANAGERSASSET-BACKED SECURITIESASSET-BACKED SECURITYASYMMETRIC INFORMATIONBALANCE SHEETBALANCE SHEETSBANK ACCOUNTSBANK BALANCE SHEETSBANK BRANCHESBANK DEBTBANK LENDERBANK LENDERSBANK LENDINGBANKING SYSTEMBANKRUPTCYBANKRUPTCY COURTBASIS POINTSBIDSBONDBOND MARKETBONDSBORROWERBROKERBROKERSCAPITAL ALLOCATIONCAPITAL MARKETCAPITAL REQUIREMENTSCASH FLOWCOLLATERALCOMMERCIAL BANKCOMMERCIAL BANKSCOMMERCIAL CREDITSCOMMERCIAL PAPERCONFORMING LOANCONSUMER PROTECTIONCREDIBILITYCREDIT DEFAULTSCREDIT ENHANCEMENTSCREDIT HISTORIESCREDIT MARKETCREDIT PERFORMANCECREDIT PROGRAMSCREDIT QUALITYCREDIT RATINGCREDIT RATING AGENCIESCREDIT RATING AGENCYCREDIT RECORDSCREDIT RISKCREDIT SCORINGCREDIT SPREADSCREDITWORTHINESSDEBTDEBT BURDENSDEBT OBLIGATIONSDEBT RATIOSDEBT SERVICEDEFAULT PROBABILITYDEFAULT RATEDEFAULT RATESDEFAULTSDEPOSITORY INSTITUTIONSDEPOSITSDEVELOPING COUNTRIESDISCLOSURE REQUIREMENTSDOMESTIC FINANCIAL MARKETSDUE DILIGENCEEMERGING MARKETEMERGING MARKETSEQUITY CONTRIBUTIONEXPENDITURESEXTERNAL DEBTFEDERAL RESERVEFEE INCOMEFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL RISKFINANCIAL SHOCKFINANCIAL SHOCKSFINANCIAL SYSTEMFINANCIAL SYSTEMSFORECLOSUREFORECLOSURESFOREIGN CAPITALFOREIGN CURRENCYFOREIGN INVESTMENTFRAUDGLOBAL CAPITALGLOBAL CAPITAL MARKETSGOVERNMENT BONDSHEDGE FUNDSHOLDINGHOLDINGSHOME LOANHOME OWNERSHIPHOMEOWNERSHIPHOUSEHOLD INCOMEHOUSING FINANCEINCOME LEVELINCOME TAXINCOME TAXESINDEBTEDNESSINFLATIONINSTITUTIONAL INVESTORSINSURANCEINSURANCE CORPORATIONINSURANCE PREMIUMINSURANCE PREMIUMSINTEREST EXPENSEINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL CREDITINTERNATIONAL INVESTORSINVESTMENT BANKINVESTMENT BANKSINVESTMENT FUNDINVESTMENT FUNDSINVESTMENT OPPORTUNITYINVESTMENT VEHICLESISSUANCELENDERLENDERSLENDING DECISIONSLENDING LIMITSLIENLIENSLINES OF CREDITLIQUIDITYLLCLOANLOAN AMOUNTLOAN AMOUNTSLOAN BALANCESLOAN MATURITIESLOAN PORTFOLIOLOAN PORTFOLIOSLOAN PRODUCTSLOAN QUALITYLOAN TERMLOAN TERMSLOCAL CURRENCYMACROECONOMIC CRISESMARKET BENCHMARKMARKET CONDITIONSMARKET CONFIDENCEMARKET DEVELOPMENTSMARKET DISCIPLINEMARKET PARTICIPANTSMARKET PRACTICESMARKET PRICESMARKET REFORMSMARKET SHAREMATURITYMICROFINANCEMONETARY CONTROLMORAL HAZARDMORTGAGEMORTGAGE FINANCEMORTGAGE INTERESTMORTGAGE INTEREST RATEMORTGAGE INTEREST RATESMORTGAGE LOANMORTGAGE LOANSMORTGAGE MARKETMORTGAGE MARKETSMORTGAGE-BACKED SECURITIESMORTGAGESNATIONAL BANKSPAYMENT DEFAULTPAYMENT DEFAULTSPAYMENT OF PRINCIPALPORTFOLIOPORTFOLIOSPREPAYMENTPREPAYMENT RATESPREPAYMENTSPRICE RISKPRIMARY MARKETPRIME LENDING RATESPRIVATE FINANCIAL INSTITUTIONSPRIVATE INVESTMENTPROBABILITY OF DEFAULTPROFIT MARGINSPRUDENTIAL REGULATIONPRUDENTIAL SUPERVISIONRATES OF INTERESTREAL ESTATE LENDINGREGULATORY SCRUTINYREGULATORY SYSTEMREINVESTMENTRESERVE FUNDSRESERVESRESIDENTIAL MORTGAGERETURNRETURNSRISK MANAGEMENTRISK OF DEFAULTRISKY BORROWERSRISKY COLLATERALSAVINGS ACCOUNTSSECONDARY MARKETSECURITIESSETTLEMENTSHORT MATURITIESSTATE BANKSUPPLY OF CREDITTAXTAX BENEFITSTAX CREDITTAX DEDUCTIONTAX EXEMPTIONSTAX INCENTIVESTAX POLICIESTAX POLICYTAX TREATMENTTOTAL DEBTTRADINGTRANCHESTRANSACTIONTRANSITION COUNTRIESTRANSPARENCYTREASURYTREASURY BILLUNDERWRITERUNDERWRITERSVARIABLE RATEYIELD SPREADWorld Bank10.1596/1813-9450-4726