This case focuses on the financial difficulties in the U.S. from August to December 2006 and faced their roots in subprime. After a brief discussion of how mortgages were structured and the period before 1990, describes subprime mortgages, as well as other innovative mortgages issued in the 1990s. It also explains how these mortgages were packaged into securities, and who ultimately came to possess these claims and their associated risk. The case then describes the pain in. .. Read more »

This case focuses on the financial difficulties in the U.S. from August to December 2006 and faced their roots in subprime. After a brief discussion of how mortgages were structured and the period before 1990, describes subprime mortgages, as well as other innovative mortgages issued in the 1990s. It also explains how these mortgages were packaged into securities, and who ultimately came to possess these claims and their associated risk. The case then describes the pain inflicted by the increase in foreclosures and the financial crisis impact of rising mortgage defaults. Moreover, the reaction of the U.S. and European central banks on the unfolding financial difficulties features. Finally, the case sets out measures that have been proposed to either the consequences or the causes of the crisis. This includes measures to reform the supervision of the financial system, change bankruptcy rules and regulation of mortgage lenders. Some attention is paid as a whole, the role of rating agencies in the crisis, and in the financial system.
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Julio J. Rotemberg
Source: HBS Premier Case Collection
21 pages.
Release Date: 18, January 2008. Prod #: 708042-PDF-ENG
Mortgage Crisis: U.S. Housing and global financial crisis HBR case solution