Ten Myths about Subprime Mortgages
This article comes straight from the Cleveland Fed…
My favorite section of this article is “myth # 8- the subprime mortgage crisis was totally unexpected”. Clearly it was not unexpected just difficult to time.
(H/T to EV for finding this!)
Click Here To Read Detailed Account of 10 Myths About The Subprime Mortgages
Introduction (Via Cleveland Fed)
Subprime mortgages have been getting a lot of attention in the United States since 2000, when the number of subprime loans being originated and refinanced shot up rapidly. The attention intensified in 2007, when defaults on subprime loans began to skyrocket. Researchers, policymakers, and the public have tried to identify the factors that explained these defaults.
Unfortunately, many of the most popular explanations that have emerged for the subprime crisis are, to a large extent, myths. On close inspection, these explanations are not supported by empirical research.
10 Myths (Via Cleveland Fed)
Myth 1: Subprime mortgages went only to borrowers with impaired credit
Myth 2: Subprime mortgages promoted homeownership
Myth 3: Declines in home values caused the subprime crisis in the United States
Myth 4: Declines in mortgage underwriting standards triggered the subprime crisis
Myth 5: Subprime mortgages failed because people used homes as ATMs
Myth 6: Subprime mortgages failed because of mortgage rate resets
Myth 7: Subprime borrowers with hybrid mortgages were offered (low) “teaser rates”
Myth 8: The subprime mortgage crisis in the United States was totally unexpected
Myth 9: The subprime mortgage crisis in the United States is unique in its origins
Myth 10: The subprime mortgage market was too small to cause big problems
Click Here To Read Detailed Account of 10 Myths About The Subprime Mortgages
July 24th, 2009 at 12:26 am
The tropuble with her argument under Myth #2 is that it compares all subprime defaults with only first-time homebuyer subprime originations. I would think that a better approach would be to compare a subcategory to the same subcategory, or the entire category with the entire category.
Speaking of which…I wonder what a similar analysis for the entire mortgage market in the same time period would show. It would be amusing if a similar analysis proffered the conclusion that mortgages period don’t encourage home ownership.