The Cleveland Federal Reserve has a new commentary, Ten Myths about Subprime Mortgages and debunks each one.
Fed's Top 10 Subprime Myths
- Subprime mortgages went only to borrowers with impaired credit
- Subprime mortgages promoted homeownership
- Declines in home values caused the subprime crisis in the United States
- Declines in mortgage underwriting standards triggered the subprime crisis
- Subprime mortgages failed because people used homes as ATMs
- Subprime mortgages failed because of mortgage rate resets
- Subprime borrowers with hybrid mortgages were offered (low) “teaser rates”
- The subprime mortgage crisis in the United States was totally unexpected
- The subprime mortgage crisis in the United States is unique in its origins
- The subprime mortgage market was too small to cause big problems
What I find incredible is option ARM resets didn't cause a crisis, but then again, if one loses their job, can't pay the mortgage, they can't pay the mortgage. If a housing price is so high, a mortgage payment eats past a paycheck, it eats past a paycheck.
On some of these myth dispels, I mean really is 20% vs. 17% rates, esp. when we don't know the total loan amounts, really evidence of a myth? But I find the overall implication of prices being just too damn high and wages, income stability was (is) just too damn low to be one strong argument that is so often completely ignored in analysis and even in policy prescriptions for any sort of recovery.
It's the jobs man.