risk in the mortgage market raises the default rate and spreads to the rest of the economy, creating a recession. In our … model two shocks are well suited to replicate the subprime crisis and the Great Recession: the mortgage risk shock and the …. This policy is successful in stabilizing the mortgage market and makes all agents better off. …

constraints in the mortgage market. This view on the fundamental drivers of the boom is consistent with four empirical … fall in mortgage rates. These facts are difficult to reconcile with the popular view that attributes the housing boom to …