Hey! Guess who's in the news this morning . . . none other than Ben Bernanke! Good ole' Benny boy was in front of the House Financial Services Committee (which is holding a hearing today about the mortgage-market turmoil and how to avoid foreclosures), stating that the market for adjustable-rate mortgages has adjusted sharply, and that markets do tend to self-correct. Bernanke charted steps that the Fed is taking in order to help reduce the risk of foreclosure. The Fed Chair also emphasized the need to bolster underwriting practices. Bernanke added that the Fed will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. Some analysts estimate that roughly 2 million loans are expected to reset to higher rates within the next 2 years. Defaults may not be too far behind the higher rates, and both Congress and the White House are trying to create proposals to stem any potential damage.
Bernanke also stated that he is opposed to raising the conforming loan limit for Fannie Mae and Freddie Mac. These firms are currently prohibited from buying loans exceeding $417,000, and both have petitioned for an increase on the limit.