Subprime mortgages: Myths And Reality

Vox ^ | 10-17-2009 | Kent Cherny & Yuliya Demyanyk

[blam]

Subprime mortgages: Myths And Reality

Kent Cherny & Yuliya Demyanyk
17 October 2009

The global crisis is said to have originated in the US subprime mortgage market. This column argues that many of the most popular explanations that have emerged for the subprime crisis are, to a large extent, myths.

Subprime mortgages have received a lot of attention in the US since 2000, when the number of subprime loans being originated and refinanced shot up rapidly. The attention intensified in 2007, when defaults on subprime loans began to skyrocket triggering what was known at the time as the “subprime crisis” (Felton and Reinhart, 2008). Researchers, policymakers, and the public have tried to identify the factors within the subprime phenomenon that triggered the implosion of the market and eventually the global financial system. Unfortunately, many of the most popular explanations that have emerged for the subprime crisis are, to a large extent, myths. On close inspection, the explanations offered are not supported by empirical research (Demyanyk and Van Hemert 2008; Demyanyk 2009a, 2009b).

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[BipolarBob]

Declines in mortgage underwriting standards triggered the subprime crisis.
Case after case in which borrowers claimed unexplained “income” fabricated by unknown persons which appeared on their mortgage filing. People were encouraged to lie because house prices were going up and NOW was the time to buy before it got out of reach. Over and over. Standards were loosened and to say otherwise is disingenuous. 100% financing?? Are you kidding me? Or over 100% to pay for closing costs. This report is bogus.

[VaRepublican]

“Myth: Declines in mortgage underwriting standards triggered the subprime crisis”
What? read his own article it seems like he contradicts his own points.