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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

The summer of  also saw a near halt in many securitization markets, includ-
ing the market for non-agency mortgage securitizations. For example, a total of 
billion in subprime securitizations were issued in the second quarter of  (already
down from prior quarters). That figure dropped precipitously to  billion in the
third quarter and to only  billion in the fourth quarter of . Alt-A issuance
topped  billion in the second quarter, but fell to  billion in the fourth quarter
of . Once-booming markets were now gone—only  billion in subprime or Alt-
A mortgage-backed securities were issued in the first half of , and almost none
after that. 
CDOs followed suit. From a high of more than  billion in the first quarter of
, worldwide issuance of CDOs with mortgage-backed securities as collateral
plummeted to  billion in the third quarter of  and only  billion in the
fourth quarter. And as the CDO market ground to a halt, investors no longer trusted

other structured products. Over  billion of collateralized loan obligations
(CLOs), or securitized leveraged loans, were issued in ; only  billion were is-
sued in . The issuance of commercial real estate mortgage–backed securities
plummeted from  billion in  to  billion in . 
Those securitization markets that held up during the turmoil in  eventually
suffered in  as the crisis deepened. Securitization of auto loans, credit cards,
small business loans, and equipment leases all nearly ceased in the third and fourth
quarters of .

DELINQUENCIES: “THE TURN OF THE HOUSING MARKET”
Home prices rose  nationally in , their third year of double-digit growth. But
by the spring of , as the sales pace slowed, the number of months it would take to
sell off all the homes on the market rose to its highest level in  years. Nationwide,
home prices peaked in April .
Members of the Federal Reserve’s Federal Open Market Committee (FOMC) dis-
cussed housing prices in the spring of . Chairman Ben Bernanke and other
members predicted a decline in home prices but were uncertain whether the decline
would be slow or fast. Bernanke believed some correction in the housing market
would be healthy and that the goal of the FOMC should be to ensure the correction
did not overly affect the growth of the rest of the economy. 
In October , with the housing market downturn under way, Moody’s Econ-
omy.com, a business unit separate from Moody’s Investors Service, issued a report
authored by Chief Economist Mark Zandi titled “Housing at the Tipping Point: The
Outlook for the U.S. Residential Real Estate Market.” He came to the following
conclusion:

Nearly  of the nation’s metro areas will experience a crash in house
prices; a double-digit peak-to-trough decline in house prices. . . . These
sharp declines in house prices are expected along the Southwest coast of
Florida, in the metro areas of Arizona and Nevada, in a number of Cali-