Subprime Lending Didn’t Increase Homeownership: Report10Mar09

[Javaman]

http://www.thetruthaboutmortgage.com/subprime-lending-didn’t-increase-homeownership-report/

The subprime lending boom that took place from 2001 to 2006 did little to boost homeownership, according to a study conducted by the Federal Reserve Bank of St. Louis.

Instead, subprime loans served as little more than temporary bridge financing, as most were prepaid (via refinance or sale) or defaulted on within just a few years after origination.

“The termination rates of subprime mortgages that originated each year from 2001 through 2006 are surprisingly similar: about 20, 50, and 80 percent, respectively, at one, two, and three years after origination,” the report said.

“For loans originated when house prices appreciated the most, terminations were dominated by prepayments. For loans originated when the housing market slowed, defaults dominated.”