The recent spike in home foreclosures in Massachusetts is caused primarily by falling housing prices, and not by rising mortgage payments, according to research released yesterday by the Federal Reserve Bank of Boston.

The contrarian report suggests the common understanding of the foreclosure crisis is somewhat mistaken. Unaffordable loans don't cause foreclosures directly. Even as subprime lending became more common, even when people fell behind on mortgage payments - during the economic downturn in 2001, for example - foreclosures were rare because house prices continued to rise.

In part, people were able to escape trouble by selling their homes at prices high enough to cover their debts. But the research also suggests that troubled borrowers tried harder to make the necessary payments, in the expectation they would profit eventually.

 

Submitted: Dec 4, 2007    Views: 418    Comments: 0    Likes: 2   


View Article: http://www.boston.com/business/globe/articles/2007/12/04/falling_pr...


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