A report released by Washington D.C.-based think tank Milken Institute says adjustable-rate hybrid loans will likely exacerbate the foreclosure epidemic as home prices fall, but the products themselves are not the cause of the problem.
Despite a recent rise in foreclosures, subprime lending actually increased homeownership, the group claimed.
The study examined first-time homebuyer data from 2000-2006, finding a net ownership gain of 434,683 units for that period.
Milken researchers said that though foreclosure rates differed among 29 loan programs studied, all could lead to foreclosure.
But the Milken Institute noted that while hybrid mortgages accounted for 36 percent of subprime foreclosures, fixed-rate loans weren’t far behind with a 31 percent share.
And of all prime foreclosures, a staggering 74 percent were tied to 30-year fixed mortgages, with hybrids and ARMs accounting for less than 21 percent.
To further justify that research, the group found that over 50% of the subprime 2/28 adjustable-rate mortgages in foreclosure during July were less than two years old, and had not yet reset to a higher interest rate.
Perhaps irresponsible lending (not subprime lending) is to blame for the mortgage crisis.