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From the Cleveland Fed: Ten myths about subprime mortgages

July 22nd, 2009

Yuliya Demyanyk, a senior research economist at the Federal Reserve Bank of Cleveland, has just written an article called "Ten myths about subprime mortgages." I don't buy everything she says. For one thing, I think the piece leaves the impression that subprime mortgages weren't a big problem. Clearly they were. Still, the piece makes for interesting reading. Here's a synopsis of her "myths":

Myth 1: Subprime mortgages went only
to borrowers with impaired credit

Myth 2: Subprime mortgages promoted homeownership

Myth 3: Declines in home values caused
the subprime crisis in the United States

Myth 4: Declines in mortgage underwriting standards
triggered the subprime crisis

Myth 5: Subprime mortgages failed
because people used homes as ATMs

Myth 6: Subprime mortgages failed
because of mortgage rate resets

Myth 7: Subprime borrowers with hybrid mortgages
were offered (low) “teaser rates”

Myth 8: The subprime mortgage crisis in the United States
was totally unexpected

Myth 9: The subprime mortgage crisis in the United States
is unique in its origins

Myth 10: The subprime mortgage market was
too small to cause big problems

Entry Filed under: News