10 Jul Is the Subprime fiasco over
In his June 5th speech to the 2007 International Monetary Conference, Federal Reserve Chairman Ben S Bernanke said, troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system.
Less than one month later, the NY Times editorial, Myths Spun by Lax Lenders , reports an increase in mortgage defaults and predicts the worse is yet to come.
Bernanke says subprime lending peaked in late 2005. That would cause the 2 year and 3 year resets on these peak loans to run from late 2007 through 2008. Certainly we are in for a storm, and the NY Times agrees. Between now and the end of next year, the interest rates on $660 billion in adjustable-rate mortgages will increase for the first time, meaning higher monthly payments for those homeowners. There is only so much money in a household budget. Higher housing costs will force homeowners to choose which bill to pay. That results in spillover to the broader economy.
Andy Miofsky, Esq.
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