Mortgages, Government Regulation, and Subprime Lending

Today we talked about mortgages. A good reference that covers the various types of mortgages is found in "Mortgage Innovation, Mortgage Choice, and Housing Decisions" by Chamber, Garriga and Schlagenhauf from the St. Louis Fed. Read the first half of the paper, the second part contains a model that is beyond the scope of this course.

For the next class meetings please read over two more articles from the St. Louis Fed:

• An article about Federal Government involvement in the mortgage market: "Federal Credit and Insurance Programs: Housing" by John M. Quigley, (this was published in July 2006).
  
• An article about growth in the subprime lending market: "The Evolution of the Subprime Mortgage Market" by Chomsisengphet and Pennington-Cross, (published January 2006).

After you have read about the growth in subprime lending, please listen to this classic piece from "This American Life" entitled "The Giant Pool of Money." That episode launched the Planet Money blog and thrice weekly podcast--a really great source for explaining economics. Today they (along with Russel Roberts from Cafe Hayek) debut an entertaining `rap' video between Keynes and F.A. Hayek about their disagreements in Macro.