Mortgages and the Markets

During the recent real estate boom, with interest rates at historic lows investors poured trillions of dollars into mortgage securities in search of higher-yielding assets. The flush times allowed many homeowners to buy homes or tap into the equity of their properties, driving the homeownership rate to its highest level ever, 69 percent. It also helped drive home prices skyward, especially along the coasts and in the Southwest. --- Now, however, mortgage defaults and foreclosures are on the rise and the homeownership rate is falling. Some economists and officials expect that up to two million borrowers may lose their homes because they cannot afford to repay or refinance their loans, because home prices are falling or because they face some other financial distress. The pain will be most severe in lower-income and working-class neighborhoods, but most economists expect the broader economy to suffer as well.