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Without a doubt, family economic hardships such as divorce, job loss, or catastrophic medical debt contribute to foreclosure rates. However, economic forces alone do not account for the severity of the current foreclosure problem.

Take a look at Oregon. From spring of 2006 to summer of 2007 foreclosures on subprime mortgages jumped 95%. Over this same period of time, state unemployment remained relatively steady.

If local economic conditions were the primary factor we would see a similar spike in foreclosure rates on FHA loans, which are also aimed at riskier borrowers. However, the Mortgage Banker Association?s own data show that subprime loans perform worse than FHA loans in the same market.

Foreclosures are spiking on subprime mortgages that include high-risk features such as prepayment penalties and steep payment increases.

We value homeownership because it creates an opportunity for accumulating wealth and giving families the ability to weather economic storms. As the current foreclosure crisis starkly demonstrates, reckless lending practices threaten homeownership and drain wealth from families.

posted 5 years, 3 months ago
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