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Editorial See other Editorial Articles Title: Federal REserve Warning - Foreclosures Federal REserve Warning (Not rated) 8-Mar-07 05:04 pm Fed Warned on Foreclosures as Mortgage Growth Cools (Update3) By Craig Torres and Carlos Torres March 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and other policy markers were warned that rising mortgage foreclosures are likely to get worse, as the central bank reported the slowest pace of loan growth in four years. The Federal Reserve Board's Consumer Advisory Council, including consumer advocates and banks, met today in Washington, with Bernanke and Fed Governors Susan Bies, Randall Kroszner and Frederic Mishkin in attendance. Home-mortgage foreclosures were the first agenda item and the officials heard anecdotes of default and families at risk. ``We have found neighborhoods with abandoned homes, 200 at a shot,'' said Louise Gissendaner, senior vice president and director of community development in Cleveland at Fifth Third Bancorp, the 10th-biggest U.S. bank by assets. ``It has technically devastated our city to a great degree.'' Mortgage borrowing rose by $792.5 billion last year, the smallest gain since 2002, according to the Fed's quarterly Flow of Funds report. The increase last quarter was the smallest since 1998, as two years of Fed interest-rate increases depressed loan demand and slowed the housing industry. The Fed raised its benchmark rate to 5.25 percent in June, compared with an average target of 3.2 percent in 2005, a year when mortgage borrowing soared to a record $1 trillion. Economists surveyed by Bloomberg News expect the Fed will hold the rate through the third quarter, the median estimate shows. Neighborhood Impact Fed officials heard stories from Cleveland, Philadelphia, Denver and New York, where neighborhoods are deteriorating because of abandoned housing resulting from foreclosures, or filings by lenders to seize borrower's properties. Bernanke and the other governors didn't comment on interest rates, the economy or the direction of regulatory policy. They listened to comments from advocates and bankers, who indicated that foreclosures are likely to increase further. ``We feel like a canary in a coal mine,'' said Stella Adams, executive director of the North Carolina Fair Housing Center in Durham. ``It is sad for us to know that there 1.2 million families at risk from foreclosure.'' Delinquency rates on real-estate loans rose to 2.11 percent for all banks last quarter, the highest in four years, according to Fed data unadjusted for seasonal patterns. Subprime Problems Much of the deterioration in mortgage quality was due to subprime loans, which are designed for those with little or poor credit history. Banking regulators on March 2 issued proposed guidance on subprime mortgages. Consumer advocates at today's meeting said poor underwriting standards in the subprime market were behind the rising foreclosure rates. ``We are facing a foreclosure crisis in this country,'' said Adams. ``There is a distinct problem in the subprime market that is contributing to the foreclosures.'' Bankers attending the meeting urged caution against over- regulation. ``We are very much in favor of responsible underwriting,'' said Mark Metz, senior vice president and deputy general counsel at Wachovia Corp. in Charlotte. ``The concern I have is how we take this guidance and use it for other products.'' Fed officials have long noted that the increase in household indebtedness is offset by rising wealth. They saw that pattern again in 2006. Real estate-related household net worth rose by $143.3 billion last quarter, after a $123.9 billion increase in the previous three months. Total net worth rose to a record $55.6 trillion in the fourth quarter, from $54.3 trillion, the Flow of Funds report showed tod
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#1. To: tom007 (#0)
This 'default snowball' is only about a third of the way down the hill. Much more to come.
lol, those missori cats are funny as hell.
If you look carefully at my lips, you'll realize that I'm actually saying something else. I'm not actually telling you about the several ways I'm gradually murdering Joan. - Tom Frost
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