A Comment on the Proposed Statement on Subprime Mortgage Lending

June 3, 2007

Todd J. Zywicki, Joseph Adamson

In 2006, foreclosure rates on subprime mortgages more than doubled over the previous year, and a number of firms that specialize in such loans—primarily in the mortgage market—either closed or filed for bankruptcy. The rise in default rates indicated that many borrowers had obtained mortgages with terms that they could not meet. The majority of subprime loans are adjustable-rate mortgages, and some policymakers are concerned that borrowers may not fully understand the risks associated with adjustable rate loan products at the time of purchase....

A Comment on the Proposed Statement on Subprime Mortgage Lending