Did banks prey on unwitting consumers or did borrowers go into foreclosure
because they stretched further than they should have?Researchers at the University of Arkansas found that most households in
foreclosure were relatively affluent and highly educated people with few or
no children, living in geographical areas that experienced extremely rapid
real estate appreciation.The researchers divided U.S. households into 21 life-stage groups, using
data from a variety of sources. Then they identified which groups
experienced the most foreclosures. The group with the highest foreclosure
percentage was one they dubbed "Cash & Careers," affluent adults born
between the mid-1960s and the early 1970s.Members of this group had high household incomes, high education levels,
high home values, and none to only a few children. Also, members of this
group were classified as aggressive investors, most of whom lived in areas -
California, Nevada, Arizona, and Florida - with rapid real estate
appreciation."The policy implication from our results is that strong consumer protection
laws, though necessary to prevent Wall Street banks from offering high-risk
loans to the most vulnerable - will not be sufficient to prevent another
financial crisis like the one the U.S. economy experienced in 2007 and
2008," says Tim Yeager, associate professor of economics and lead author of
the study.Source: University of Arkansas (05/06/2010)
because they stretched further than they should have?Researchers at the University of Arkansas found that most households in
foreclosure were relatively affluent and highly educated people with few or
no children, living in geographical areas that experienced extremely rapid
real estate appreciation.The researchers divided U.S. households into 21 life-stage groups, using
data from a variety of sources. Then they identified which groups
experienced the most foreclosures. The group with the highest foreclosure
percentage was one they dubbed "Cash & Careers," affluent adults born
between the mid-1960s and the early 1970s.Members of this group had high household incomes, high education levels,
high home values, and none to only a few children. Also, members of this
group were classified as aggressive investors, most of whom lived in areas -
California, Nevada, Arizona, and Florida - with rapid real estate
appreciation."The policy implication from our results is that strong consumer protection
laws, though necessary to prevent Wall Street banks from offering high-risk
loans to the most vulnerable - will not be sufficient to prevent another
financial crisis like the one the U.S. economy experienced in 2007 and
2008," says Tim Yeager, associate professor of economics and lead author of
the study.Source: University of Arkansas (05/06/2010)
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