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Impact of Financial Markets on Economic Stability and Growth: The Case of Sub-Prime Mortgage Lending - page 35 / 42

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1/23/2015

Jamshid Damooei, PhD

35

What to Look for in the Months or Years Ahead….Continued

Government involvement in the subprime mortgage markets is on a level not seen since the resolution of the S&L crisis.

opponents of the bailout plan argue that the default rates on many of these modified mortgages are extremely high — estimating in the range of 40% to 60% — and in an environment where the borrowers in question have little home equity in properties where asset values are falling, the cost of postponing an eventual foreclosure and default is potentially greater to the holders of the loans.

The Government plans have yet to be announced and the details to be revealed.

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