Maybe it wasn't subprime loans. Maybe it wasn't fraudulent paperwork. Maybe the culprit is really no-money-down:
Many policy makers and ordinary people blame the rise of foreclosures squarely on subprime mortgage lenders who presumably misled borrowers into taking out complex loans at low initial interest rates. Those hapless individuals were then supposedly unable to make the higher monthly payments when their mortgage rates reset upwards.
But the focus on subprimes ignores the widely available industry facts…that 51% of all foreclosed homes had prime loans, not subprime, and that the foreclosure rate for prime loans grew by 488% compared to a growth rate of 200% for subprime foreclosures….
Sharing the blame in the popular imagination are other loans where lenders were largely at fault — such as "liar loans," where lenders never attempted to validate a borrower's income or assets.
This common narrative also appears to be wrong…The analysis indicates that, by far, the most important factor related to foreclosures is the extent to which the homeowner now has or ever had positive equity in a home.
It certainly shakes up the narrative, but it isn't hard to construct an alternative narrative that makes sense. When you owe more money on your house than it's worth, walking away from the mortgage can be rational behavior. And what of the "has or ever had" positive equity? Not surprising that even having ever, once, held equity in your home, tends to keep people from walking away, especially when you consider how strongly people become attached to the notion of "I invested in this house, dammit" to the point where they won't sell it at a paper loss in the face of all rational evidence that they should cut their losses.
bearing blog 