The great surge in mortgage defaults 2006-2009: The comparative roles of economic conditions, underwriting and moral hazard

In this research we exploit the power of a large and rich sample of individual loans originated from 2000 to 2007 to study the relative roles of underwriting, moral hazard and local economic conditions in the Great Surge in mortgage defaults. With these data we can observe the information available to investors and control for observable underwriting as well as economic conditions. We can also use the data to infer the share due to moral hazard. Estimates from these data suggest that much of the variation was due to economic conditions.