Greenspan Cautions About Subprime Loan Defaults and Foreclosures

(EMAILWIRE.COM, March 16, 2007 ) SACRAMENTO, Calif -- Alan Greenspan, former Chairman of the Federal Reserve on Thursday made comments about the spillover effects of defaults in the subprime mortgage market.Mr. Greenspan, whose utterances are watched carefully by economists and investors around the world, admitted that it was “hard to find…evidence” about the effects on the broader economy from defaults in the subprime sector. However, he did opine that, “you can’t take 10% out of mortgage originations without some impact.”While he did not mention specific related effects of delinquencies of mortgage borrowers he did indicate that he had seen some effects in collateralized debt markets. In essence, these markets to which Mr. Greenspan referred to are bundles of mortgages sold to investors who look to income from the collected loans.Greenspan spoke about housing more broadly by commenting that he thought the current downward trend in housing values had more to do with a leveling off of prices after years of spectacular growth. He did not minimize the problems in the subprime sector, but indicated that he did not think that these challenges were exclusively responsible for the slowdown in housing prices.The former Fed Chairman spoke about the current problems in the residential housing sector and laid the blame for them at the feet of buyers who came into the game late in the run-up. Many of these buyers often bought a house in desperation because they thought that they might not be able to afford a home if prices continued to rise. Not surprisingly, these borrowers who “bought high” are the ones most likely to be in default on their mortgage payments. And, according to the Mortgage Bankers Association, the proportion of mortgages in the initial stages of foreclosure rose to the highest rate on record,According to website Mortgage Lender Implode-O-Meter, a site which purports to track mortgage lenders in difficult straits, 39 lenders have gone belly-up since late 2006. Commentator and foreclosure expert Patrick McGilvray, J.D., President of Sacramento, CA based http://www.TheHomeBuyingCenter.com had this to say, “people across the country contact us and call every day with stories about how their subprime mortgage is hurting them financially. Many are looking to us to help them with a short-sale because they now owe more than their properties are worth and their adjustable rate mortgages have reset to higher payments or are about to in the very near future.”Many of the people that Mr. McGilvray works with have told him that they did not understand the loan products they were sold, and a sizable minority blame their loan officer for intentionally deceiving them about the type of mortgage product they are involved with.Alan Greenspan intimated that if home prices continue to fall in the U.S. he thought there could be a greater impact on the American economy as a whole. He thought that fallout from the housing sector’s troubles could affect consumer spending ultimately. If this possibility becomes a reality, the economic effects could be wide-ranging as almost 66% of the nation’s economic activity is driven by consumer spending.Greenspan refused to make a prediction about the monetary policy at the Federal Reserve or what might happen to interest rates during the rest of 2007.Contact:Patrick McGilvray, J.D.patrick@thehomebuyingcenter.comhttp://www.thehomebuyingcenter.comTel: 888-444-buyer###This press release was issued through GroupWeb EmailWire.Com. For more information on press release distribution, go to http://www.emailwire.com.

Patrick McGilvray, J.D.
Patrick McGilvray, J.D.

patrick@thehomebuyingcenter.com