Syllabus (as of 1/2/12)

Transcription

1 Harris School of Public Policy Studies Housing Policy and the Crisis PPHA 34710: Winter 2011 Syllabus (as of 1/2/12) Instructor: Ben Keys Time and Location: T-Th 9-10:20 a.m., Harris School Room 140C Office Hours: Thursdays 3:30-5 and by appointment, Harris School Room 161 Course Description: When looking at the current housing market, a natural question arises: How did we get here? This class will explore the rise and fall of the housing market in the 2000s, and discuss the impact on households, neighborhoods, financial markets, and the government. Topics include the mortgage securitization chain, the role of regulation and the GSEs, state and local support for low-income housing, the foreclosure crisis, and the future of the housing market and mortgage finance. There are no prerequisites, but you will be expected to read and interpret sophisticated empirical analysis from the economics and finance literatures. Required Reading Materials: Schwartz, Alex F., Housing Policy in the United States, 2 nd Edition. New York: Routledge Publishing, Wachter, Susan M. and Marvin M. Smith, eds., The American Mortgage System: Crisis and Reform. Philadelphia: University of Pennsylvania Press, Immergluck, Dan, Foreclosed: High-Risk Lending, Deregulation, and the Undermining of America s Mortgage Market. Ithaca: Cornell University Press, Lewis, Michael, The Big Short: Inside the Doomsday Machine. New York: W.W. Norton & Co., Additional required readings will be posted on CHALK. More non-required readings will be added to the syllabus going forward. Grading: Grades will be based on three short (2-3 page) memos and one longer written assignment or research proposal/project (8-12 pages). If the class is small enough, grading will take class participation into consideration. No late assignments will be accepted. 1

2 Assignment Due Dates: 1/23 First short memo due 2/6 Second short memo due 2/27 Final paper outline and bibliography due 3/12 Final paper due Course Q&A Forum: A course discussion forum will be available through CHALK. This forum should be used to pose questions to the instructor. I guarantee a response to forum-posted questions within 24 hours. Questions not posted to the forum and ed to the instructor will not be answered as quickly. Guest Lectures: TBD Tentative Class Schedule: After an overview of the housing market, we will start at the investor end of the housing finance chain and work our way backward until we get to borrowers, then expand our view to include neighborhoods and local urban development. Required readings are marked with a * and are subject to change. Week 1: The Current State of the Housing Market and Mortgage Finance * Harvard Joint Center for Housing Studies, The State of the Nation s Housing 2011 * Chapters 1 and 2 of Housing Policy in the United States * Chapter 1 of The American Mortgage System LPS Mortgage Monitor for October 2011 Chapters 1 and 2 of Foreclosed Week 2: Mortgage Finance and Irrational Exuberance * The Big Short * NPR s Giant Pool of Money episode on This American Life: 2

3 Chapter 3 of Housing Policy in the United States Chapter 2 of The American Mortgage System Gorton, Gary, Questions and Answers about the Financial Crisis, testimony to Financial Crisis Inquiry Commission Gorton, Gary, The Panic of 2007, working paper Gerardi, Kristopher, Andreas Lehnert, Shane M. Sherlund, and Paul Willen, Making Sense of the Subprime Crisis, Brookings Papers on Economic Activity, 2008 Mayer, Christopher, Housing Bubbles: A Survey, Annual Review of Economics, 2011 Week 3: Incentive Problems in Mortgage Finance The Ratings Agencies * Chapter 10 of The American Mortgage System * Chapter 3 of Foreclosed * Coval, Joshua, Jakub Jurek, and Erik Stafford, The Economics of Structured Finance, Journal of Economic Perspectives, 23(1), Winter Ashcraft, Adam, Paul Goldsmith-Pinkham, and James Vickery, MBS Ratings and the Mortgage Credit Boom, Federal Reserve Bank of New York Staff Report no 449, May 2010 Ashcraft, Adam, and Til Schuermann, Understanding the Securitization of Subprime Mortgage Credit, Foundations and Trends in Finance 2, no. 3, July 2008 Benmelech, Efraim, and Jennifer Dlugosz, The Credit Rating Crisis, NBER Macro Annual, Benmelech, Efraim, and Jennifer Dlugosz, The Alchemy of CDO Credit Ratings, Journal of Monetary Economics 56, Week 4: Incentive Problems in Mortgage Finance -- Lenders and Brokers * Chapter 4 of Foreclosed * Keys, Benjamin J., Tomasz Piskorski, Amit Seru, and Vikrant Vig, Mortgage Financing in the Housing Boom and Bust, 3

4 *Berndt, Antje, Burton Hollifield, and Patrik Sandas, The Role of Mortgage Brokers in the Subprime Crisis, NBER working paper 16175, July 2010 Keys, Benjamin J., Tanmoy Mukherjee, Amit Seru, and Vikrant Vig, Did Securitization Lead to Lax Screening? Evidence from Subprime Loans, Quarterly Journal of Economics, 2010 Jiang, Wei, Ashlyn Nelson, and Edward Vytlacil, Liar s Loan? Effects of Origination Channel and Information Falsification on Mortgage Delinquency, working paper Purnanandam, Amiyatosh, Originate-to-Distribute Model and the Subprime Crisis, forthcoming in Review of Financial Studies Krainer John, and Elizabeth Laderman, Mortgage Loan Securitization and Relative Loan Performance, working paper August 2011 Nadauld, Taylor, and Shane M. Sherlund, The Role of the Securitization Process in the Expansion of Subprime Credit, working paper 2009 Week 5: The GSEs and the Role of Regulation * Chapter 4 of Housing Policy in the United States * Chapter 6 of Foreclosed * CBO, Fannie Mae, Freddie Mac, and the Federal Role in the Secondary Mortgage Market, December 2010 Swagel, Phillip, The Financial Crisis: An Inside View, Brookings Papers on Economic Activity, Spring 2009 Jaffee, Dwight, and John M. Quigley, The Future of The Government Sponsored Enterprises: The Role for Government in the U.S. Mortgage Market, NBER working paper 17685, December 2011 Week 6: Borrowers and the Crisis * Mayer, Christopher, and Karen M. Pence, Subprime Mortgages: Where, What, and to Whom? Housing Markets and the Economy: Risk, Regulation, and Policy,

5 * Bucks, Brian K., and Karen M. Pence, Do Borrowers Know their Mortgage Terms? Journal of Urban Economics 2008 * Ben- David, Itzhak, Financial Constraints and Inflated Home Prices during the Real- Estate Boom, American Economic Journal: Applied Economics 3, 2011 * Lacko, James M., and Janis K. Pappalardo, The Failure and Promise of Mandated Consumer Mortgage Disclosures: Evidence from Qualitative Interviews and a Controlled Experiment with Mortgage Borrowers, American Economic Review Papers & Proceedings, May 2010 Chapter 3 of The American Mortgage System Week 7: Foreclosure and its Impact on Neighborhoods * Chapter 6 of The American Mortgage System * Chapter 5 of Foreclosed * Mayer, Christopher J., Karen M. Pence, and Shane M. Sherlund, The Rise in Mortgage Defaults, Journal of Economic Perspectives * Campbell, John Y., Stefano Giglio, and Parag Pathak, Forced Sales and House Prices, American Economic Review Week 8: Public housing, Rent Control, and Vouchers * Chapters 5, 6, and 8 of Housing Policy in the United States * Glaeser, Edward L., and Erzo F.P. Luttmer, The Misallocation of Housing Under Rent Control, American Economic Review 2003 * Katz, Lawrence F., Jeffrey R. Kling, and Jeffrey B. Liebman, Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment, Quarterly Journal of Economics 2001 Week 9: Federal, State, and Local Support for Housing * Chapters 9 and 11 of Housing Policy in the United States * Glaeser, Edward L., and Jesse M. Shapiro, The Benefits of the Home Mortgage Interest Deduction, NBER working paper 9284, October

6 Week 10: The Future of Homeownership and Housing Finance * Chapters 13, 14, and 15 of The American Mortgage System * Chapter 13 of Housing Policy in the United States * Chapter 7 of Foreclosed Zandi, Mark, and Christian Deritis, The Future of the Mortgage Finance System, Moody s Special Report, February