subprime vs prime

Hat tip to Wendy for sending in this article on subprime vs. prime mortgages causing the crisis.  The authors probably didn’t catch the fact that prime borrowers were getting neg-am loans based on FICO scores only, and those weren’t considered subprime loans:

https://fortune.com/2015/06/17/subprime-mortgage-recession/?

An excerpt:

We can draw two conclusions from this data. One is that your chances of being foreclosed upon in the past decade was more a matter of timing than anything else. If you were a subprime borrower in, for instance 2002, who bought a bigger house than a more prudent and creditworthy borrower would have bought, chances are you would have been fine. But a prime borrower who did everything right—bought a house he could easily afford, with a large downpayment—but did so in 2006 would have had a higher chance of defaulting than the subprime borrower with better timing.

Since whether you were hurt by the crisis had more to do with luck than anything else, Ferreira argues we should rethink whether doing more to help underwater homeowners would have been a good idea.

https://fortune.com/2015/06/17/subprime-mortgage-recession/?

Pin It on Pinterest