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Subprime gets bad rap in ‘Big Short’ but is key to easing affordability crisis

The Conversation (2016)

Jaime Luque

Anyone who’s dug into the 2008 financial crisis knows the role that bundling and selling subprime housing loans played in bringing the world to the brink of economic collapse – out-of-control behaviors well-depicted in the movie “The Big Short.”

But one thing I hope “The Big Short” doesn’t do is further tarnish the image of subprime lending. Despite their poor reputation, such loans remain a key tool in easing the housing affordability crisis and expanding the availability of mortgages to low-income Americans seeking to realize the dream of homeownership. They also can help policymakers cope with the growing ranks of the homeless.

First, we need to fix the subprime mortgage market, so that the ways in which it contributed to the financial crisis aren’t repeated. I’ve been studying the world of subprime in recent years, and these are some of the lessons from my current and past research.

subprime; home affordability crisis; homelesness

Economics, Finance and Urban Studies and Planning

February 25, 2016

Jaime Luque. "Subprime gets bad rap in ‘Big Short’ but is key to easing affordability crisis" The Conversation (2016)
Available at: http://works.bepress.com/luque/22/

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