AEI’s March 28, 2007 Subprime Seminar - V
For many of the people involved, the high point of AEI’s March 28th seminar on the Subprime Mortgage Crisis [1] was UBS researcher Tom Zimmerman’s 25 minute presentation and PowerPoint slide show.[2] His two key points are simple enough.
- Eroding house prices, or House Price Appreciation (HPA) in Zimmerman’s talk, is the driving force behind rising delinquencies and defaults in the US housing market today.
- A sudden and unforeseen rise in Early Pay Defaults (EPDs) is what imploded the subprime sector, starting in late 2006.
The value in Zimmerman’s talk comes largely from his careful and detailed quantitative support for the first (now almost intuitively obvious [4]) assertion. As housing blogger Tanta helps point out in a recent post,[5] a lot of industry players didn’t seem to get it at the time these events were unfolding.
His second assertion, that EPDs took down the whole subprime sector, is a bit more startling. His refreshing testimony that this event took him completely by surprise comes across as genuine.
The AEI event site [1] provides short summaries of Zimmerman’s and the others’ presentations, but no official transcript was produced. Doom is proud to present this unofficial annotated transcript of Zimmerman’s effort, and we trust it will prove a useful resource in studying this important talk.
