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Both predatory lending and household overreaching occurred during the subprime housing bubble. But which one was the primary culprit for the foreclosure crisis? Economists and researchers want to know because the policy implications are vastly different.
Identifying the cause is not an easy task, because the verdict ultimately depends on the intentions of the borrower and the lender. If predatory lending was to blame, strong consumer protection laws like those in the Dodd-Frank Act might be sufficient to avoid a future foreclosure crisis. But if household overreach was the main cause, preventing another foreclosure crisis is a much more complex policy challenge. Explore the details and conclusions in “The Foreclosure Crisis in 2008: Predatory Lending or Household Overreaching?” in the July Regional Economist.
Some recent developments, including a sharp decline in long-term delinquencies, suggest that there may be an end in sight for the foreclosure woes. Read why in “Some Closure on Foreclosures?”, the lead article in the July 2011 issue of the St. Louis Fed’s Monetary Trends.
The St. Louis Fed’s Research web site is now host to IDEAS, a bibliographic online database dedicated to economics. IDEAS lets users browse and search over one million research works. The site also includes popularity and ranking of papers, authors and citations.
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Fed in Print: An index of the economic research conducted by the Fed.