WASHINGTON - The subprime mortgage crisis is not likely to end
anytime soon -- and could create losses of between $50 billion and
$100 billion, Federal Reserve Board Chairman Ben Bernanke told the
Senate Banking Committee today.
"Rising delinquencies and foreclosures are creating personal,
economic and social distress for many homeowners and communties,"
he said, "problems that likely will get worse before the get
better."
And, he noted, "the credit losses associated with subprime have
come to light and they are fairly significant.
"Some estimates are in the order of between $50 and $100 billion of
losses associated with subprime credit products."
Committee Chairman Christopher J. Dodd, D-Conn., found some hope in
the Fed's newly aggressive attitude toward lenders, as well as
fresh efforts to get more and better information to
consumers.
He said he was "pleased" that Bernanke was taking some steps, but
added "I want to see more action."
So did others.
"We're deeply concerned that the sub-prime problem is not going to
just be contained so easily, but could deeply spread and have some
repercussions out there," said Sen. Richard Shelby, R-Alabama, top
Republican on the committee.
Bernanke, though, would not provide much solace.
"There are clearly going to be significant financial losses
associated with the faults and delinquincies on these mortgages,"
he said. "As a result, the credit quality of [many products] that
include in them substantial amounts of subprime mortgage papers is
being downgraded."
The Fed has been moving quickly to address possible unfair and
deceptive practices by lenders, and held a hearing last month to
discuss pre-payment penalties, the use of escrow accounts for taxes
and insurance and other issues.
Other reviews are underway, as Bernanke Thursday proposed changes
that would "address concerns about mortgage loan advertisements and
solicitations that may be incomplete or misleading."
And, Bernanke said, those rules would "provide mortgage disclosures
more quickly, so that consumers can get the information they need
when it is most useful to them."
Source: http://www.courant.com/business/hcu-subprime0719,0,4480607.story
