US Mortgage Defaults Stabilizing

According to an American housing official the default rate on US mortgages is starting to stabilize. Assistant Secretary Darlene Williams of the US Housing and Urban Development department said that the US Federal Reserve’s bigger than expected half-percent rate cut last week signaled that authorities were taking action to support the economy.

The concern that we have been dealing with in certain sections of the credit markets have frozen up as banks and investors have been grown fearful of borrowers going into default on their loans. This has especially effected the subprime market which loans money to borrowers with poor credit. Worries over this tightening credit hit global stock markets most of August and September. “The hope is that the Fed rate cut would send the signal that government is concerned and willing to continue to analyze the situation so that the market can relax,” William said. “We believe we still have a market that is correcting, but we don’t expect any drastic changes” in regards to the amount of loan defaults.

Williams also went on to say that “Subprime mortgages Democratize credit, and so we don’t want to throw that option away.” “Not all of these loans result in foreclosures.” Approximately 5% of all US mortgages are subprime, and about one fifth of these mortgages are in risk of default.

Williams said she hoped that Congress would pass FHA reforms to expand federal backing of mortgages. The reform would allow FHA to refinance loans for tens of thousands of borrowers delinquent on payments because their mortgages have reset to higher rates.