Federal Housing Administration (FHA)

Fritz, Marie J.

doi:10.4135/9781412956215.n317

Cited by 1 publication

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“…In fact, they were key to making mortgages more accessible to more Americans. The incentives provided by these mortgages with low to no down payments made buying a home cheaper than renting, granting families with stable but modest incomes the ability to become homeowners (Fritz, 2019). These ARMs with low to no down payments only became prone to defaults after house prices started declining in 2006 and refinancing into a different mortgage became difficult due to tightened underwriting standards.…”

Section: Accusation Of Predatory Lendingmentioning

confidence: 99%

Cause Determination of the Adjustable-Rate Mortgage Market Collapse During the Financial Crisis

Wang¹

2020

IJEF

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This paper provides insight into what caused the decline of the adjustable-rate mortgage (ARM) market during the 2007–2009 financial crisis. Contrary to common perception, the failure of the ARM market cannot be primarily attributed to predatory lending targeting subprime borrowers from low-credit households. This popular narrative is incomplete and disregards some important factors. I present three key factors that challenge the narrative and point to previously undiscussed sources that may have contributed to the ARM market collapse. First, the accusation of predatory lending does not account for other possible causes of mass ARM defaults. Second, the sole focus on the market’s subprime segment disregards the impact of prime ARMs on the market. Third, the narrative’s citation of subprime ARMs having greater delinquency rates and foreclosure numbers fails to recognize the significant percentage increase in prime ARM failures in the years leading up to the crisis, as well the disparity in typical outstanding balances between subprime and prime ARMs.

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Section: Accusation Of Predatory Lendingmentioning

confidence: 99%

Cause Determination of the Adjustable-Rate Mortgage Market Collapse During the Financial Crisis

Wang¹

2020

IJEF

View full text Add to dashboard Cite

show abstract

Federal Housing Administration (FHA)

Cited by 1 publication

References 0 publications

Cause Determination of the Adjustable-Rate Mortgage Market Collapse During the Financial Crisis

Cause Determination of the Adjustable-Rate Mortgage Market Collapse During the Financial Crisis

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