Name the Year: Declining Home Prices and Equity Removal

UPDATE: In this context, Dr. Black catches Jamie Dimon expressing what is at best ignorance:

However, [Dimon] cautioned, until the market meltdown “you never saw losses in these products, because home prices were going up.”

All that research in 1984 and 1990 was for naught, apparently.

I’m still away (things are better, but still not completely back to normal), but this is too good not to post:

Unfortunately, many default models using original LTV [Loan-to-Value] have underestimated the level of delinquencies in recent years. Measurement of the amount of equity borrowers have in their home is the chief cause. Such mismeasurement is due to two factors: declining home prices and removal of equity via second mortgages or home equity lines of credit.

Is this from:

  1. 2008-2010?
  2. 2004-2006?
  3. 1996?
  4. officially 1996, but other textual evidence indicates it was written between 1989 and 1993?

My answer is (4); the official one is (3), since it’s from the Third Edition of Frank J. Fabozzi’s Bond Markets, Analysis and Strategies (now in its 7th edition).  But if anyone out there has the first or second edition and wants to check the chapter on Mortgage Loans, I’ll give odds the paragraph is virtually identical in the Second Edition.

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