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Equity Cushion May Prevent Another Housing Crisis

Posted To: MND NewsWire

Home equity reports have not been particularly interesting over the last few years. Home prices kept rising, owners kept whittling down their loan-to-value (LTV) ratios and avoiding the serial cash-out refis we have seen in earlier boom times. With the current crisis, an equity buffer becomes pretty important. The narrow margins that allowed mortgaged homeowners to quickly plunge underwater when home values dropped in the Great Recession cost many their homes. Equity not only allows a homeowner more options – refinancing into a lower cost mortgage, flexibility in selling the house or in negotiating a loan modification – but also gives them an incentive to stay in the home. CoreLogic reports that home prices, as yet unaffected by the COVID-19 pandemic, continued to rise in the first quarter…(read more)

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