In 2005, Alan Greenspan, then chairman of the Federal Reserve Bank, praised subprime mortgages as a positive innovation made possible by better risk assessment, and "representative of the market responses that have driven the financial services industry throughout the history of our country." Only two years later, there was growing concern that failing subprime loans, which had shot up to nearly a quarter of the total mortgage market originations, were driving our economy into recession.
It is now clear these concerns were well-founded. The damage stemming from subprime foreclosures has grown and spread beyond even most pessimistic predictions, bursting the housing bubble and resulting in the Unites States' first nationwide decline in housing prices since the Great Depression.
In this report, we provide an update on the subprime mortgages that triggered the current crisis, focusing on the performance of these loans and efforts to stop the ongoing surge of foreclosures.
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Subprime Snapshot: |
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Homes already lost through subprime foreclosures |
1.5 million |
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Subprime mortgage holders currently delinquent |
2 million |
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Subprime loans originated during the second half of 2005 that are currently delinquent |
26% |
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Subprime loans originated during the the first half of 2007 that are currently delinquent |
42% |
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Estimated cost of subprime foreclosures near foreclosed homes |
$352 billion |
Other Key Indicators:
In 2008, share of
Projected foreclosures on all types of mortgages during the next five years (Credit Suisse): 8.1 million or 1 in 9 households or 1 in 6 with mortgages.
Estimated decline in