Treasury Dept. Tracking Bad Credit Mortgage Spikes
The government is monitoring the distress in the subprime (bad credit mortgage) industry and believes that the current situation remains a “manageable” one.
Monday’s comments by Robert Steel, a high-level Treasury undersecretary for domestic finance, came as concern mounted on Wall Street and elsewhere that a blowup of companies that make higher-risk home loans to consumers with poor credit or low incomes could spill over into other industries.
“We monitor the markets all the time, and are hopefully pretty aware of market conditions,” Steel said.
“It seems to us that the situation is a manageable one, that we’re watching.”
Federal bank regulators, concerned about the recent spike in delinquency and default rates on bad credit mortgage loans, earlier this month called on lenders to exercise caution in making such loans and to strictly evaluate borrowers’ ability to repay them.
The regulators said the guidelines, if formally adopted by the agencies and followed by lending institutions, could result in a smaller number of home mortgage borrowers qualifying for risky home loan products.
Stocks showed little or no movement on Wall Street Monday as cracks continued to appear in the market for subprime mortgages. A warning from New Century about its financial woes overshadowed some recent merger news, which often provides a boost to enthusiasm in the stock market.
A liberal think tank said Monday that the federal government should take new steps to protect low-income homeowners at risk of foreclosure.
The Center for American Progress said the government should consider grants to expand mortgage aid and foreclosure prevention programs for families falling behind on their monthly payments.
As many as 2.2 million families around the country could lose their homes to home mortgage foreclosure in the coming years, according to a 2006 report by the Durham, N.C-based Center for Responsible Lending.
“The Congress can’t wait for that many families to foreclose,” said Almas Sayeed, who wrote the report. “The economic impacts for communities and for the country could be devastating.”
SOURCE: Houston Chronicle