Tuesday, July 14, 2009
New Evidence on the Foreclosure Crisis - WSJ.com
Perhaps, someone should just compare mortgage loans to Mother Nature.
We all know you can't fool Mother Nature...
We all know you can't fool Mother Nature...
Stan Liebowitz writes about it in the Wall Street Journal:
"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 point: although only 12% of homes had negative equity, they comprised 47% of all foreclosures.
Further, because it is difficult to account for second mortgages in this data, my measurement of negative equity and its impact on foreclosures is probably too low, making my estimates conservative."
