Great Recession Holds Mortgage Crisis Lessons for Today


The COVID-19 pandemic has led to historically high rates of US unemployment and sudden declines in household incomes. In the Law360 article “Great Recession Holds Mortgage Crisis Lessons for Today,” Analysis Group Managing Principal Mark Howrey and Vice Presidents Jonathan Borck and Lauren Hunt point out that unexpected drops in household income are one important contributing factor in mortgage delinquencies and defaults. However, they also say it is too early in the pandemic to know whether another critical factor, declining home prices, will follow. The authors then look to the Great Recession of the late 2000s for potential roadmaps to the COVID-19 pandemic’s economic and legal implications.

While the pandemic and the Great Recession both represent times of massive economic disruption, the authors note that the mortgage and lending market has changed in major ways. They explain that, leading up to the Great Recession, adjustable and other nontraditional mortgages, relaxed underwriting guidelines, and a lack of time to build home equity contributed to a fragile financial situation for borrowers. The 2020 housing market, on the other hand, is arguably more stable, buoyed by mortgages (and mortgagees) with fewer risky features. Time will reveal how much, if at all, differences such as these can ease the strain on financial institutions and homeowners.

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Borck J, Howrey M, Hunt L