While he remains optimistic about the American economy, despite the fall of the dollar, the country's top economist warned this week that the continuing subprime crisis is likely to get worse in the near future.
The Federal Reserve this week cut interest rates by half a percent to help homeowners grappling with the subprime fallout. In his first public address since the rate slash, chairman Benjamin Bernanke managed to keep his optimism in check.
"The market for subprime mortgages has adjusted sharply and originators now are employing tighter underwriting standards," Mr. Bernanke testified this week to the U.S. House of Representatives' Committee on Financial Services. "The Federal Reserve, together with the other federal supervisory agencies, has encouraged lenders and loan servicers to identify and contact borrowers who, with counseling and possible loan modifications, may be able to avoid entering delinquency or foreclosure."
He admitted during his appearance that the scale of subprime losses has blown past almost all expectations. And the bad news keeps coming, as short-term low-interest rates will soon balloon as the honeymoon period wears off for thousands of mortgages.
It seems the worst is truly yet to come.
We at Mortgage Loan Place have devoted thousands of words to the subprime crisis over the past six months. We do it because we want to make a difference. Given the current, increasingly grim outlook, it's a good time to start asking questions and understanding your options.