Did
Structured Finance Contribute To The Sub-Prime Mortgage Crisis in the
U.S.? (2008)
Few
people knew what sub-prime means before the summer of 2007 as the
mortgage market in the United States (U.S.) experienced difficulties
with sub-prime mortgage (mortgages to low income borrowers) defaults on
a large scale. These insolvency problems spread very fast through the
whole financial system by defaults in structured products on sub-prime
mortgages and caused international investor panic and equity markets
downturn. Furthermore, some financial institutions became insolvent and
had to be rescued by the governments. It has been argued that
securitization along with structured finance have contributed to the
rise of lending in the sub-prime mortgage market and thus provided
excess of liquidity, which resulted in overlending and lax mortgage
granting procedures. Thus this study concentrates on the connection
between structured finance and mortgage markets. The goal of the study
is seen as investigating the role of securitization in the U.S.
mortgage lending and borrowing market as well as the leverage of
structured securities such as Collateralized Debt Obligation (CDO).
Thus the securitization activity in the mortgage market before the
sub-prime defaults as well as the credit deterioration of structured
securities after these defaults have been investigated. The results
suggest that mortgages were indeed to a large extend securitized by
some lenders and possibly the demand for these securitized tranches
have caused more money supply in this market. Furthermore, the study
finds out that structured securities are indeed more leveraged and
risky than anticipated by investors and thus there could have been some
underestimation of credit risks when restructuring sub-prime mortgages.
- 10,000 words –
65 pages in length
- Excellent use of
literature
- Good in depth analysis
- Well written throughout
- Ideal
for finance and business students
1 Introduction
Reasons For Topic Chosen
Academic Objectives
Chapters Outline
2
Literature Review
Chapter Overview
Securitization
Definition
MBS And CDO
Structured Finance Credit Rating
To Securitize Or Not To Securitize
Chapter Summary
3
Methodology
Chapter Overview
Method
Securitization Trend (Hypothesis 1)
Credit Rating Downgrades (Hypothesis 2)
Method Justification
Research Limitations
Chapter Summary
4
Findings
Chapter Overview
Securitization Trend (Hypothesis 1)
Credit Rating Downgrades (Hypothesis 2)
S&P Statistics
Moody´S Statistics
Fitchratings Statistics
Chapter Summary
5
Analysis
Chapter Overview
Securiitzation Trend (Hypothesis 1)
Credit Rating Downgrades (Hypothesis 2)
Chapter Summary
6
Conclusion
Summary
Limitations
Areas For Further Research
References
Bibliography
Appendix
Section
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