In the current environment, more-rapid declines in house prices may have an adverse impact on the broader economy and, through their effects on the valuation of mortgage-related assets, on the stability of the  1  Based on servicer data from First American LoanPerformance. BIS Review 55/2008  1  financial system.
Thus, finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy. To determine the appropriate public- and private-sector responses to the rise in mortgage delinquencies and foreclosures, we need to better understand the sources of this phenomenon.