Because home prices rose steadily for a long time, troubled homeowners were able to refinance, take cash out and often reduce monthly payments at the same time, which reduced foreclosure rates.

Judged as of 2006 against housing and mortgage data from the years before. The claim has three linked parts: (a) home prices had risen steadily for a long period; (b) this let troubled homeowners refinance, take cash out or lower their monthly payments; (c) this held down foreclosure rates. True: the data show a long, steady rise in national home prices (e.g. Case-Shiller or OFHEO, roughly the late 1990s to 2005–06), a high level of refinancing and cash-out refinancing, and foreclosure rates that were low or falling over that period, with economic research or industry analysis linking rising equity and refinancing to fewer foreclosures. Mostly true: all three parts hold but a minor detail is off, for example payments were not usually reduced even though refinancing and cash-out did avert defaults. Mixed: price growth and refinancing are documented, but the evidence that this lowered foreclosure rates is weak or contested, or foreclosure rates were not low. Mostly false: the mechanism is overstated, for example foreclosures were already rising markedly by 2006 despite rising prices, or refinancing played little role. False: the data show home prices were not rising steadily, or foreclosure rates were high or rising throughout the period.

Set before the research began.

1. E1 Microsoft Word - 1q05hpi615pm.doc Office of Federal Housing Enterprise Oversight (OFHEO), press release for 1Q 2005 House Price Index · 1 June 2005

   “House prices rose 12.5 percent, while prices of other goods and services rose only 3.1 percent.”

2. E2 U.S. House Price Index Report - 4Q 2005 / December | FHFA Federal Housing Finance Agency (FHFA) · 1 March 2006

   “House Price Appreciation Continues at Robust Pace. OFHEO House Price Index Shows Annual Rise of Nearly 13 Percent; Unprecedented Increases in 26 Metropolitan Areas.”

3. E3 Understanding Mortgage Foreclosure: Recent Events, the Process, and Costs (Order Code RL34232) Congressional Research Service (Darryl E. Getter) · 26 March 2008

   “Subprime foreclosure rates declined markedly between 2002 and 2005.”

4. E4 ARMs Fuel Jump In Home Foreclosures CBS News · 20 June 2006

   “In the last several years, millions of Americans took equity out of their houses and refinanced when interest rates were at historical lows and housing prices were at record highs.”

OFHEO data show strong house price growth: about 12.5% a year as of 1Q 2005 [E1] and nearly 13% a year at 4Q 2005 [E2]. However, these quotes cover only 2005 and do not by themselves show a long, steady rise. A June 2006 report says millions of Americans refinanced and took equity out of their homes in recent years [E4], and the CRS reports that subprime foreclosure rates fell markedly between 2002 and 2005 [E3]. None of the evidence includes research that links rising equity and refinancing to fewer foreclosures, so the causal part of the claim is not established and the claim is rated mixed.