NYT has a sobering counterpoint to the recent gangbanging of the subprime mortgage market in the press and in Washington. It's main points:

• historically, new types of mortgages decried as risky and harmful to consumers
• less than 15% of risky borrowers are delinquent on payments
• less than that have foreclosed
• traditional cause of foreclosures prevail: job loss, divorce, major medical expenses
• foreclosures highest in economic stagnation areas, not housing bubble pop

Austan Goolsbee writes, "...someone with a low income now but who stands to earn much more in the future would, in a perfect market, be able to borrow from a bank to buy a house. That is how economists view the efficiency of a capital market: people's decisions unrestricted by the amount of money they have right now." (emphasis added)

One thing the article misses: predatory brokers pushing these mortgage innovations to borrowers who truly should've never got them. Certain facts of the market don't show up in National Bureau of Economic Research working papers. — BEN POPKEN

'Irresponsible' Mortgages Have Opened Doors to Many of the Excluded [NYT]
(Photo: amyadoyzie)