Earlier this week, the Federal Reserve Bank of New York released a study concluding that the mortgage crisis beginning in 2007 was not due to subprime borrowing, but instead lay in boom-market patterns largely powered by prime borrowers. This study puts further lie to the widespread belief not only that subprime borrowers sparked mortgage-market downfall, but also caused the great financial crisis. Were this the only study absolving subprime mortgages, one might discount it. However, as discussed below, it forms part of a body of increasingly persuasive evidence uncovering structural risks in prime mortgage finance, risks that could well put the lie also to current regulatory faith in mortgage-market invincibility due to the discipline demanded of post-crisis underwriting.
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