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Mortgage Crisis

November 2, 2007 • Volume 17, Issue 39
Should the government bail out borrowers in trouble?
By Marcia Clemmitt

Introduction

Valerie Hayes lost her home in Boston to foreclosure, a fate thousands of American homeowners will suffer because they were unable to make the payments on high-interest subprime mortgages.  (AP Photo/Steven Senne)
Valerie Hayes lost her home in Boston to foreclosure, a fate thousands of American homeowners will suffer because they were unable to make the payments on high-interest subprime mortgages. (AP Photo/Steven Senne)

More than 2 million borrowers will lose their homes to foreclosure because of subprime mortgage lending in recent years. With the housing market booming, lenders enticed many lower-income people into buying homes they couldn't afford by offering adjustable-rate mortgages (ARMs) with temptingly low initial teaser interest rates. Many loans didn't require down payments or documented proof of income. Moreover, with real-estate prices rising many homeowners used the higher value of their homes to get second mortgages to pay for extras like remodeled kitchens. But this year the housing market crashed and the party ended: The low teaser loans reset at higher interest rates, and many borrowers defaulted on their new, higher mortgage payments. When the dust settles, investors who bought mortgage-based securities stand to lose $160 billion or more. Congress and the Bush administration are debating how to help borrowers keep their homes and whether tough, new lending standards are warranted.

ISSUE TRACKER for Related Reports
Housing
Apr. 05, 2013  Homeless Students
Dec. 14, 2012  Future of Homeownership
Dec. 18, 2009  Housing the Homeless
Nov. 02, 2007  Mortgage CrisisUpdated
Feb. 09, 2001  Affordable Housing
Jan. 06, 1989  Affordable Housing: Is There Enough?
Oct. 30, 1981  Creative Home Financing
Nov. 07, 1980  Housing the Poor
Dec. 21, 1979  Rental Housing Shortage
Nov. 24, 1978  Housing Restoration and Displacement
Apr. 22, 1977  Housing Outlook
Sep. 26, 1973  Housing Credit Crunch
Aug. 06, 1969  Communal Living
Jul. 09, 1969  Private Housing Squeeze
Mar. 04, 1966  Housing for the Poor
Apr. 10, 1963  Changing Housing Climate
Sep. 26, 1956  Prefabricated Housing
Sep. 02, 1949  Cooperative Housing
May 14, 1947  Liquidation of Rent Controls
Dec. 17, 1946  National Housing Emergency, 1946-1947
Mar. 05, 1946  New Types of Housing
Oct. 08, 1941  Rent Control
Aug. 02, 1938  The Future of Home Ownership
Sep. 05, 1934  Building Costs and Home Renovation
Nov. 20, 1933  Federal Home Loans and Housing
Nov. 17, 1931  Housing and Home Ownership
BROWSE RELATED TOPICS:
Consumer Credit and Debt
Mortgage Loans and Home Finance
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