$KIN IN THE GAME

First-time author Elgonemy offers an in-depth look at the 2007 housing market collapse and suggests changes to mortgage practices to prevent its recurrence.

Drawing on 25 years of experience in commercial real estate, the author offers thoughtful ideas on the cause of the real estate bubble, suggests solutions to the current rash of foreclosures, and proposes ways to prevent it from happening again. Elgonemy’s book is thorough and well-researched: Extensive data illustrates boom-and-bust cycles and real estate trends in home price and size, while economic statistics chart decreased personal savings and increased bankruptcy. “The U.S. financial meltdown was caused by an interconnected system of loans improvidently made, inappropriately packaged, imprudently bought, and inadequately capitalized,” the author says. He also says, “We all screwed up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors.” Elgonemy analyzes the role of real estate agents, mortgage brokers, loan officers and appraisers, as well as CEOs who received excessive compensation and other “wicked incentives.” He demonstrates the effect residential real estate problems had on the commercial sector, and how the junk bonds and leveraged buyouts of the 1970s led to the current crisis. He points out that home ownership is not for everyone—and shouldn’t be promoted as such: For many people, renting is a better option, and it should be encouraged rather than disparaged. Exhaustive in scope, the lengthy tome—nearly 400 pages—tacks on an additional 100 pages in appendices and footnotes; “Chapter Two: Mumbo Jumbo” clocks in with 60 pages that define loan securitization, mortgage-backed securities, liquidity risk and collateralized mortgage obligations, among other concepts. Elgonemy says his book is neither a textbook nor a “post-mortem publication [on] the subprime mortgage crisis”; rather, it’s intended for “intelligent laymen [and] financial professionals.” His ideas and solutions would be most appropriate, however, for government regulators and readers working in the financial industry.

Not for novices, but economically adept readers interested in a comprehensive analysis of what went wrong in the residential real estate market will find a wealth of information and ideas.