Last weekend the Wall Street Journal published a Stan Liebowitz opinion regarding the source of the current foreclosure crisis. His point in the opinion was that most of the governmental policies being discussed to correct the crisis are misdirected. Interesting graph shows the cause of mortgage foreclosures in the 2nd half of 2008 to be (in order):
Negative equity - 285,305 foreclosures
Unemployment increase - 183,447 foreclosures
Subprime FICO score (<620) - 148,697 foreclosures
Downpayment of less than 3% - 130,014 foreclosures
Mortgage rate reset upward - 60,942 foreclosures
He says that "51% of all foreclosed homes had prime loans, not subprime, and that the forecosure rate for prime loans grew by 488% compared to a growth rate of 200% for subprime foreclosures." Also "a significant reduction in foreclosures will happen when and only when housing prices stop falling and unemployment stops rising." Check out his opinion at http://is.gd/1twmK.
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