Federal Reserve Board Governor Explains Mortgage Crisis Proposal

Washington, D.C. (AHN) - A Federal Reserve governor on Wednesday explained steps the agency was taking to mitigate the mortgage crisis to a gathering of real estate professionals.

Governor Randall S. Kroszner of the Board of Governors of the Federal Reserve System addressed the National Association of Hispanic Real Estate Professionals Legislative Conference 2008 in Washington, D.C. on the topic of "Protecting Homeowners and Sustaining Homeownership."

"The mortgage market has long been a source of strength in the U.S. economy, but it is facing significant challenges, especially in the subprime segment that serves consumers who have shorter or weaker credit records," Kroszner said, according to a transcript of his speech.

He gave the gathering the statistics from the most recent month data was available, saying that as of January about 24 percent of subprime adjustable-rate mortgages (ARMs) were ninety or more days delinquent. That is twice the level of last year and about 190,000 of the foreclosures were started in the fourth quarter of last year, which represented an 11 percent increase in foreclosures from the third quarter, Kroszner said.

In addition, many of the mortgage defaults occurred within a few months of when the loan originated and those defaults were twice the percentage of a year earlier and four times the rate two years earlier, he told the audience.

Kroszner told the audience that problems with mortgage loan defaults "highlighted the shared interest of mortgage borrowers, their communities, lenders, and investors in protecting borrowers from abusive practices and preserving their choices."