Leading Rich

Last week FreedomWorks released a Wharton study titled “The Inequity of Subprime Mortgage Relief Programs“. This study has extensive research including the distribution of subprime mortgage debt outstanding. Interestingly enough you may be surprised at the distribution. Below is an excerpt of the analysis showing California, Florida, New York and Texas with the greatest Subprime debt. This is a significant fact in that many of the large foreclosure rates occur in those states also.

Per FreedomWorks Press Release

” Among the findings in the study:

* Programs that would freeze or reduce interest rates often leave risk-taking subprime borrowers in a better position than borrowers who made more prudent decisions such as taking out fixed rate loans initially or borrowing smaller amounts.

* Differences in foreclosure rates among states are due to exogenous economic forces and not borrower or loan characteristics; for example, prime loans are defaulting at the highest rate in the same states where subprime defaults are highest. Policies that deny benefits to households in delinquency or foreclosure disproportionately exclude those who were unlucky enough to live in the states that experienced the worst of the current economic downturn.

* The benefits of borrower relief programs will be highly concentrated geographically, but the costs will not. Federally mandated programs will be funded by taxpayers in all 50 states or through increased costs of future borrowing, but the benefits of the programs will accrue primarily to just some homeowners in some states, particularly California, Florida, New York and Texas.

* Programs to increase the conforming loan limit, including the Economic Stimulus Act of 2008, raise questions of fairness and increase the risk borne by Freddie Mac and Fannie Mae.”

Source http://www.freedomworks.org