Ten Myths about Subprime Mortgages

[ColbertWatcher]

(found on fark)

Ten Myths about Subprime Mortgages
Yuliya Demyanyk

On close inspection many of the most popular explanations for the subprime crisis turn out to be myths. Empirical research shows that the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. Nor were its causes unlike other crises of the past. The subprime crisis was building for years before showing any signs and was fed by lending, securitization, leveraging, and housing booms.

--Cleveland Fed

I highly recommend checking out the whole thing, but here's the myths that are debunked:

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

Please take the time to read it, it's a real eye-opener.

[BlooInBloo]

1. Myth #11: The housing bubble crisis is specifically a subprime crisis.

[Hello_Kitty]

2. Thank you!

It's a stagnating wages, rising unemployment, rising costs of health care and college, middle and working class being attacked from all angles crisis. Most of the folks I know who are facing foreclosure did not have subprime loans. A few them have been in their houses for many years. They lost their jobs and couldn't pay the mortgage anymore.

[tinkerbell41]

3. You are Correct!!!!

Had my mortgage for 11 yrs. Straight fixed 30 yr. Great rate great credit. Now... I'm unemployed with a kid in college, and bills up wazoo. Work has been terrible in my trade since 2001, and no I'm not kidding. I'm sooo tired of the spew that homeowners weren't "responsible" and took out mortgages they couldn't afford. I based my payment on unemployment check "just in case" my father in same trade was unemployed for 18 mos. in the early 80's.

[Warpy]

4. I know a lot of working people who qualified for 30 year fixed mortgages

who got sucked into the ARM trap. I was given the hard sell but knew enough to tell them to cram it.

However, the people who did the nothing down, interest only mortgages were generally upper middle class people who were speculating on real estate, buying new construction here and letting it sit empty, trying to make a killing as housing inflated.

Unfortunately, builders were slapping up yuppie barns overnight, so the speculators are the only ones who got killed around here.

The rest of this article is great.

[ColbertWatcher]

5. The author seems to be an expert on sub prime mortgages. n/t

[ColbertWatcher]

6. Kick. n/t

[gmoney]

7. Gosh, The Federal Reserve's analysis? THAT will certainly be unbiased. :/

Besides, Rush told us all what caused the subprime loan crisis: ACORN, fronted by Barack Obama, FORCED banks to give big fat jumbo loans to unemployed poor black people who never intended to repay their loans.

Geez, don't you people pay ATTENTION? 3 hours a day is all he asks!

:sarcasm:

[EmeraldCityGrl]

8. A small select group took a huge chunk of money off

the table. They can put any label on it they choose, the bottom line is the American
people were robbed of their homes, retirements, college funds, and investments.
The crooks got away and I do not understand where all the outrage went with one word, "subprime."