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Links 7/3/09
naked capitalism —
... New Evidence on the Foreclosure Crisis Stan Liebowitz, Wall Street Journal. Today's must read. Zero equity was the problem, which means the new FHFA 125% LTV program is no solution. We keep sayin' the answer in principal mods, not just payment reductions. but no one wants to hear it. The analysis also suggests a lot of policy remedies are misguided. ...
What's Behind Foreclosures? (by Don Boudreaux)
Cafe Hayek —
... Writing in today's Wall Street Journal, economist Stan Liebowitz reports the results of his careful study of the data on mortgage foreclosures. Liebowitz finds that the chief reason homeowners default is negative equity in their homes (and, hence, not upward adjustments in the interest rates owed on ARM mortgage loans, or any other the other alleged culprits). Here are some key paragraphs: ...
Zero Down Is a Foreclosure Factor (Duh)
The Big Picture —
... non-junk paper, all of which traces its roots to d) Greenspan’s ultra low interest rates.
Yes, bad lending standards, no money down, lack of income verification or debt servicing ability were key culprits. But to claim that it was more Prime than sub-prime is belied by the history of foreclosures. And, it ignores all the other moving parts to the equation.
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Source:
New Evidence on the Foreclosure Crisis
Zero money down, not subprime loans, led to the ...
Outrage reduced to Outrageous
Lawrance G. Lux —
... Stan Liebowitz goes to the trouble of analyzing the Causes of the foreclosure rates in the Mortgage industry. He finds that walking away from negative equity mortgages was the greatest culprit, and he blames the insufficiency of Down Payment amount as responsible; a factor which I might suggest is doubtful in the Consumer decision. People were taught to live off their net equity, establishing their expenditure patterns from the amounts that Credit Cards would allow. These were effectively cut down and further taxed in Interest with the Crisis, and Mortgage holders dismissed the ...
Mid-Year 2009 Checkup
The Market Ticker —
... First, I want to focus on housing, because, well, everyone else is, even though the housing mess is a symptom, not the cause of the problem. But the WSJ's "opinion" page has an interesting article up this morning: ...
What is really behind foreclosures?
The Austrian Economists —
... Casey Mulligan diagnosis the situation, taking off from this discussion by Stan Liebowitz. What do you think? Does this evidence lend more support to the thesis that what the financial situation represents is a credit crunch or a insolvency crisis? ...
Happy Independence Day
UpsideTrader —
... The bulls lost their mojo and most of the charts I see look like shorts now. Hope you enjoy the long weekend. Enjoy the links. It was no money down , not subprime that caused the crisis. The coming ...
It's the Zero-Down, Stupid
CrossingWallStreet.com —
The WSJ has a fascinating article on what caused the foreclosure crisis. It wasn't subprime. Instead, it was no money down:
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. The accompanying figure shows how important negative equity or a low Loan-To-Value ratio is in explaining foreclosures (homes in foreclosure during December of 2008 generally entered foreclosure in the second half of 2008). A simple statistic can help make the ...
WSJ: No Money Down Or Negative Equity Top Source of Foreclosures
Fund My Mutual Fund —
This is an opinion piece in the Wall Street Journal but with a lot of data behind it so I thought worthwhile to share. What is does is show the causes of a large ream of foreclosures and dispels some of the myths of what is causing it. We've discussed since 2007 the "walk away" situation happening as first 1 in 6 [ ...
New Evidence on the Foreclosure Crisis - WSJ.com
FinanceProfessor.com —
Here is a little game for you. Do ask ten people on the street what caused to all of the defaults and problem loans that led to the bank failures that led the the economy falling? Chances are subprime lending and lying banks will be fairly high on the list of answers. Unfortunately, an article in the WSJ by Stan Liebowitz suggests that these common answers are wrong. What caused the problem? Low and no-money-down borrowing. The article: New Evidence on the Foreclosure Crisis - WSJ.com : "The focus on subprimes ignores the widely available industry facts (reported by the ...
