Risky Mortgages Drive Housing Market Boom and Bust
The article explores how alternative mortgage products and house-price expectations influenced mortgage defaults during the housing crisis. By analyzing different mortgage options and future house-price predictions, the researchers found that when people expected higher house prices, they were more likely to choose alternative mortgages. These alternative mortgages, which allow borrowers to delay paying off the loan, were also more likely to result in defaults compared to traditional mortgages.