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While correlation doesn't imply causation, I don't think that's quite what he's doing here. To your first point: even though the rate of default of subprime mo

by seldo 17y ago

While correlation doesn't imply causation, I don't think that's quite what he's doing here. To your first point: even though the rate of default of subprime mortgages is much, much greater, the massive losses that are bringing down banks are the problem. So his point is that the rate of foreclosure doesn't matter so much as the volume: so focus on what is causing foreclosures in the biggest category. To your second: the remedies currently being considered by congress all focus on regulating the interest rate of mortgages. His point is that the rate, while a factor in determining foreclosure, is much less important than negative equity, and the remedies for preventing negative equity are different.

apinstein 17y ago
Fair enough rebuttal. I do agree with a lot of his conclusions, but some are misguided. He seems to think that only one factor can be the critical factor, but I think he's missing the point. If someone cannot afford their mortgage, they are pretty much going to get foreclosed on. It's just a matter of time. However, the more negative equity they have, the sooner they are likely to do this. Also, he craps on Obama's "making homes affordable" plan because of it's target of 31% housing-to-income ratio. But this program is only available for those with Loan-To-Value ratios under 105%, precisely because frankly it's pretty obvious that if you are way underwater on your house you are better off walking away from it. Now, I don't really think that we should've spent the money on pretty much any program to save homeowners. Giving $3000 to a mortgage company for refi'ing a loan that empirically goes to foreclosure anyway 50% of the time is a giant waste of time and money. Both the banks and homeowners got screwed by entering these loans, and they should be left to rot with them. It probably would've been better to try to convince banks to just turn the owners into renters for a 3-5 year period to let the mortgage market meltdown run its course while somewhat punishing both parties that entered such horrible deals. Oh well.

by seldo 17y ago

apinstein 17y ago

Fair enough rebuttal. I do agree with a lot of his conclusions, but some are misguided. He seems to think that only one factor can be the critical factor, but I think he's missing the point. If someone cannot afford their mortgage, they are pretty much going to get foreclosed on. It's just a matter of time. However, the more negative equity they have, the sooner they are likely to do this. Also, he craps on Obama's "making homes affordable" plan because of it's target of 31% housing-to-income ratio. But this program is only available for those with Loan-To-Value ratios under 105%, precisely because frankly it's pretty obvious that if you are way underwater on your house you are better off walking away from it. Now, I don't really think that we should've spent the money on pretty much any program to save homeowners. Giving $3000 to a mortgage company for refi'ing a loan that empirically goes to foreclosure anyway 50% of the time is a giant waste of time and money. Both the banks and homeowners got screwed by entering these loans, and they should be left to rot with them. It probably would've been better to try to convince banks to just turn the owners into renters for a 3-5 year period to let the mortgage market meltdown run its course while somewhat punishing both parties that entered such horrible deals. Oh well.