Researchers investigating the trigger for the 2008 mortgage meltdown have found some borrowers’ math just doesn’t add up. Unprecedented numbers of American subprime mortgage holders began defaulting on their loans in 2006, precipitating two years later the most severe global recession since The Great Depression. Pundits have offered numerous theories about what started the mortgage mayhem, but firm evidence has remained elusive. According to a study
published today in Proceedings of the National Academy of Sciences, however, one contributor to the historic problem was poor basic math skills among borrowers. According to researchers’ calculations, in 2006 and 2007, more than 50% of subprime mortgages in the U.S. were in default. For comparison, in 2003, about 15% of subprime mortgages were in default. Although unscrupulous lending practices in the mid-2000s have been blamed for the jump in mortgage defaults, researchers suggest that’s only part of the story. Controlling for a variety ...
