NEW YORK, NY December 13, 2007 —Here's the conventional view of why foreclosures have spiked in the US - low teaser rates lured borrowers into risky sub-prime loans. The rates reset, the payments exploded and a massive number of borrowers were forced to default on their mortgages. One economist challenged this view yesterday at a city-sponsored conference on foreclosures. WNYC's Lisa Chow reports.

REPORTER: Paul Willen is a senior economist at the Federal Reserve Bank in Boston. He says it's not resetting rates, but falling housing prices that are driving the rise in foreclosures. He says his data shows that most defaulting subprime borrowers had trouble making their mortgage payments even before the rates went up and this suggests these homeowners were already in trouble when they bought the loans.

WILLEN: What the subprime mortgage market has contributed is not bad loans. It's contributed people who are exceptionally vulnerable to falling house prices.

REPORTER: In other words, when prices were going up, those in trouble could sell their homes. Now with prices stagnant or falling, they're trapped. Housing advocates acknowledged this possible explanation, but said they were focused on helping those in need right now. For WNYC, I’m Lisa Chow.