New research challenges small down payment blame for housing bubble
University of Virginia professor W. Ben McCartney examined mortgage data to explain who took risk before and after the 2007 crash.
Low payments existed before boom
Mortgages with small down payments were already common before the housing market started rising in the early 2000s. These loans remained frequent throughout the boom period and continued to be issued after prices peaked.
Private lenders replaced government support
Before the market surge, many low-payment loans were backed by the Federal Housing Administration and the Department of Veterans Affairs. During the boom years, private lenders took over much of that market instead of government agencies.
Data contradicts popular story
A popular explanation claims people suddenly could buy homes with only 5 percent down to cause a flood of buyers. The data shows this story is at odds with the facts regarding who supplied these mortgages.
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