The Boston Fed has released details of a study where it found that the majority of homeowners who are entering into foreclosure had “prime” loans, but encountered difficulty only after refinancing their homes, sometimes more than once, increasing their loan balances over the past several years. When they couldn’t pay their loans anymore, they had to default, as average home prices in the Commonwealth dipped.
From today’s Herald:
Researchers found that among homeowners who lost properties to foreclosure in 2007, only 30 percent had bought places using subprime mortgages – high-interest loans given to people with bad credit.
By contrast, 70 percent used prime loans: Lower-rate mortgages that people with good credit qualify for.
However, the Boston Fed found those who purchased homes in 1999 and fell into foreclosure during 2007 refinanced their homes about 4.1 times on average during the boom years.
Source: “Cash-outs” up foreclosures – By Jerry Kronenberg, The Boston Herald