NBN Online for the week of November 12, 2007

Heading Off Home Foreclosure Damage on Fed’s Radar Screen

In testimony before the Joint Economic Committee of the U.S. Congress, Federal Reserve Chairman Ben Bernanke last week indicated that the nation’s central bank continues to watch the fallout of problems with the subprime mortgage market on the financial markets and economic growth and is also focusing its efforts on reducing foreclosures on homes.

Echoing comments made earlier in the week by Fed Governor Randall S. Kroszner at NAHB’s Symposium on Housing Affordability (click here for NBN story in this issue), Bernanke in his Nov. 8 remarks noted that rising foreclosures could further threaten the U.S. economy as it is expected to move into a slower phase.

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Fed Governor Lists Steps to Remedy Subprime Distress

With subprime mortgage delinquencies and foreclosures possibly getting worse before they get better, “a high degree of collaboration and innovation to identify solutions” is needed to help borrowers keep their homes, Federal Reserve Governor Randall S. Kroszner told NAHB’s Symposium on Housing Affordability on Nov. 5 in Washington, D.C.

“It is imperative that we work together as a financial services community to look for ways to help borrowers address their mortgage challenges, particularly those who may have fewer alternatives, such as lower-income families,” Kroszner said.

Distress among subprime borrowers has been concentrated in the variable-rate mortgages that constitute two-thirds of that market, he said, and more than 17% of those loans are now more than 90 days in arrears, a tripling of the share since mid-2005.

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