Vicki Been, Decoding the foreclosure crisis: Causes, responses, and consequences, 30 J. Pol’y Analysis & Mgmt. 388 (2011) (with Sewin Chan, Ingrid Gould Ellen & Josiah R. Madar).
In June 2010, 4.6 percent of all loans outstanding on one- to four-family homes were in the foreclosure process, and another 9.9 percent were at least one payment past due. Economists predict that 8 to 13 million homes will have been foreclosed on before the crisis ends. Americans are losing their homes at rates not seen since the Great Depression, when most borrowers held relatively short-term balloon mortgages and deflation made real interest rates extremely high. Today’s crisis was driven initially by risky underwriting, but now is primarily caused by job loss and falling house prices.
The recent recession has reduced income for many households and led to the highest unemployment rates since the 1940s. Historically, foreclosure rates are generally low and job losses bump rates up only modestly. But in the recent downturn, unemployment spells have been unusually long—in June 2010, 46 percent of the unemployed had been unemployed for 27 weeks or more. Few mortgage holders will have savings to manage for more than six months without earned income.
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