Enterprise Risk Management Initiative, Poole College of Management, North Carolina State University

Providing Thought Leadership, Education and Training on the Subjects of Enterprise Risk Management

Making Sense of the Subprime Mortgage and Credit Crisis of 2008-09

College of Management Faculty: Bruce Branson

Course Overview

This course, offered periodically as a one-hour course, provides an overview of the basic structure of the U.S. residential mortgage market as it has existed from 2002 to the present. This will allow participants to better understand the incentive structures and risk management policies that allowed (indeed fostered) the creation of poorly underwritten mortgage loans.

Specifically, course participants will:

  • Gain knowledge of the various players involved in originating, servicing, and repackaging residential mortgage loans for resale as investment securities
  • Learn the basics of constructing these various securities and the process by which they are then evaluated for credit-worthiness by the ratings agencies
  • Understand the structural difficulties of disentangling these investment securities to restructure loan terms and forestall home foreclosures
  • Explore various solutions to mitigate further damage within the global financial sector and the broader global economy
  • This course is designed to provide a non-technical discussion of the origins of the subprime mortgage loan disaster that has engulfed financial markets around the globe. The aim is to search for lessons to help prevent a reoccurrence of this financial catastrophe. An examination of the risk management policies applied by the investment banks (and others) who invested heavily in these structured products will be conducted. This course requires no specific knowledge of financial accounting, quantitative risk management, or statistics.