Understanding the Problem

The current recession is largely attributed to the collapse of the housing bubble. This collapse is blamed, by many, upon a wave of foreclosures as a result of making too many subprime loans. Recent data shows this is not so. This Wall Street Journal article makes the point this way:

By far, the most important factor related to foreclosures is the extent to which the homeowner now has or ever had positive equity in a home.

The author looks at other causes but concludes the most important is that:

Stronger underwriting standards are needed -- especially a requirement for relatively high down payments.

It makes sense; people are unlikely to walk away from homes into which they have sunk a substantial amount of their hard-earned money. With a requirement for higher down payments, the housing bubble likely wouldn't have happened at all.

The entire article is worth your time.