twitter linkedin
facebook google+
Search:

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News

 

Mortgage News

HOT Topics

production

servicing

compliance

legal

fraud

secondary

jobs

appraisal

site map

www.loan-academy.com/
Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.


FDIC, Fed Discuss Subprime

Bernanke, Bair speak in Chicago

May 17, 2007

By JERRY DeMUTH


CHICAGO -- The Federal Reserve is "currently undertaking a thorough review of all of its options under the law" to deal with subprime lending problems, its chief said Thursday, and it may use its rule-making authority to prohibit certain specific practices. He noted more buyers have entered the secondary market for subprime mortgages.

Lending practices that are newly determined to be "unfair and deceptive" could be prohibited under the Home Owners Equity Protection Act, Fed Chairman Ben Bernanke pointed out in his speech that opened a Federal Reserve Bank of Chicago conference. And HOEPA regulations, unlike those set by the Fed, he noted, apply to all mortgage lenders.But any new rules that are issued by the Fed should be sharply drawn to prevent "legal and regulatory uncertainty" that could reduce legitimate subprime lending and subject lenders to private lawsuits for redress of HOEPA violations, he warned.

photo of Ben Bernanke
Fed photo of Ben Bernanke
But any new rules that are issued by the Fed should be sharply drawn to prevent "legal and regulatory uncertainty" that could reduce legitimate subprime lending and subject lenders to private lawsuits for redress of HOEPA violations, he warned.

Further use of the Fed's HOEPA authority will be discussed at a public hearing next month, he added.

While criticizing the negative developments of the subprime lending business, he concluded, "The vast majority of mortgages, including even subprime mortgages, continue to perform well."

But the problems of the subprime lending market must be evaluated and acted upon not only by the Federal Reserve, but also by other regulators and Congress who must then decide what additional regulations or oversight are needed to prevent a recurrence, Bernanke said.

"In my judgment, effective disclosures should be the first line of defense against improper lending," he explained.

But combating bad lending practices, including deliberate fraud or abuse, may require additional measures, he admitted.

Steps financial regulators can take also include requiring more lender disclosures to borrowers, prohibiting "clearly abusive practices," offering "principles-based guidance combined with supervisory oversight," and working with industry participants to "establish and encourage best practices or supporting counseling and financial education for potential borrowers," he explained.

But the "patchwork nature of enforcement authority in subprime lending" poses its own challenges, he said, and the Fed is committed to working closely with other regulators to achieve "uniform and effective enforcement."

And although supervisory guidance applies only to banks and thrifts, it often is adopted by state regulators of nonbank lenders, he pointed out.

Some mortgage originators have contributed to subprime problems, Bernanke charged. As mortgage originations slowed while investor demand for securities with high yields remained string, they loosened their underwriting standards and engaged in risk layering.

"Intense competition for subprime mortgage business -- in part the result of the excess capacity in the lending industry left over from the refinancing boom earlier in the decade--may also have led to a weakening of standards," he said, according to a transcript of his speech.

"These looser standards," he said at the conference, "were likely an important source of the pronounced rise in early-payment defaults."

"Some originators had little capital at stake and did not meet their buy-back obligations after the sharp rise in delinquencies," the transcript indicated he said.

However, some signs of self-correction in the subprime market are now occurring, Bernanke pointed out at the meeting, with lenders tightening underwriting and investors scrutinizing subprime loans more carefully.

"But although the supply of credit to this market has been reduced credit has by no means evaporated," he commented.

Increased purchases of subprime loans by investment banks, hedge funds and other private capital sources are beginning to fill the void left by the decline in securitizations, he pointed out.

And while some subprime originators have gone out of business, he noted, others remain in operation after being purchased by large financial institutions.

"We see no serious broader spillover to banks or thrift institutions from the problems in the subprime market," he stressed.

But delinquencies and foreclosures are likely to increase this year and next, he warned, "as many adjustable-rate loans face interest-rate resets."

While Bernanke laid much of the blame for the subprime blow-up on loosened underwriting standards, Federal Deposit Insurance Corporation Chairman Sheila C. Bair placed some of the blame on the models used to determine subprime loan risk.

"Models can be flawed," she said at the same conference. "Look at the models for subprime mortgages. The models didn't look at situations where home prices would decelerate and interest rates would go up. A lot of models didn't pick that up."


Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]
Servicing News | Servicer Ranking | Delinquency Statistics
Stories about mortgage servicers, delinquency and f o r e c l o s u r e s. Coverage of servicing lawsuits and loan servicing technology.


Logout forgot
password?

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter

MBS

mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders