Wednesday, October 28, 2009

What Caused the Foreclosure Crisis?

It seems that America’s foreclosure crisis has everyone pointing fingers. A quick scan of weekly news headlines reveals some of the most common culprits that are taking the blame for the rising tide of foreclosures nationwide: subprime loans, adjustable rate mortgages, securitization of mortgages, and ultrarelaxed underwriting standards. While all of these most certainly played a role in creating the foreclosure monster, new evidence from the Wall Street Journal suggests that one commonly overlooked factor is the cause of most foreclosures today - negative equity. In fact, data from the Mortgage Bankers Association shows that 51% of foreclosed homes had prime loans, not subprime. This means that proposed and existing government policies, which focus mainly on loan modifications and other assistance initiatives to remedy high foreclosure rates in the housing market are misdirected...

1 comment:

What is FHA Loan said...

Great post. Essentialy we are at the doorstep of an economic depression. The numbers reveal widespread economic weakness, with unemployment and housing locked in a death spiral, the overall economy will only be dragged further underwater.

Until the government starts engines of commerce which the private sector seems incapable of, such as “alternative” energy, widespread infrastructure repair and replacement, and high speed rail, America will continue to falter and with her the world economies.