Un article de Wikipédia, l'encyclopédie libre.

Sommaire 1 Reste à traduire 1.1 Subprime mortgage lending 1.2 Timeline 1.2.1 Start of the Crisis: Increase in Defaults 1.2.2 March 2007: Attempts to Gain Compensation 1.2.3 US Congressional Inquiries 1.2.4 Spread to Alternative-A Sector 1.2.5 June 2007: The crisis deepens 1.2.6 Collapse of Bears Stearns Hedge Funds 1.2.7 July 2007: Criticism and Changes to Subprime Ratings 1.2.8 July 2007: Fair Mortgage Practices Act 1.2.9 Further Collapses: American Home Mortgage Investment & HomeBanc 1.3 Causes 1.4 Foreclosures and federal response 1.5 Impact on broader economy

[modifier] Reste à traduire

Observers of the meltdown have cast blame widely. Some, like Chairman of the U.S. Senate Banking Committee Chris Dodd, have highlighted the predatory practices of subprime lenders and the lack of effective government oversight.^[1] Others have charged mortgage brokers with steering borrowers to unaffordable loans, appraisers with inflating housing values, and Wall Street investors with backing subprime mortgage securities without verifying the strength of the portfolios. Borrowers have also been criticized for entering into loan agreements they could not meet. ^[2]

[modifier] Subprime mortgage lending

Subprime mortgage loans are riskier loans in that they are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history. Subprime borrowers are generally defined as individuals with limited income or having FICO credit scores below 620 on a scale that ranges from 300 to 850. Subprime mortgage loans have a much higher rate of default than prime mortgage loans and are priced based on the risk assumed by the lender.

According to the 2001 Expanded Guidance for Subprime Lending Programs, a subprime mortgage refers to "... the credit characteristics of individual borrowers. Subprime borrowers typically have weakened credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories. Subprime loans are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. Such loans have a higher risk of default than loans to prime borrowers. Generally, subprime borrowers will display a range of credit risk characteristics that may include one or more of the following:

• Two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months;
• Judgment, foreclosure, repossession, or charge-off in the prior 24 months;
• Bankruptcy in the last 5 years;
• Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood; and/or
• Debt service-to-income ratio of 50% or greater, or otherwise limited ability to cover family living expenses after deducting total monthly debt-service requirements from monthly income."

Although most home loans do not fall into this category, subprime mortgages proliferated in the early part of the 21st century. About 21 percent of all mort­gage originations from 2004 through 2006 were subprime, up from 9 percent from 1996 through 2004, says John Lonski, chief economist for Moody's In­vestors Service. Subprime mortgages totaled $600 billion in 2006, accounting for about one-fifth of the U.S. home loan market.

[modifier] Timeline

[modifier] Start of the Crisis: Increase in Defaults

Many lenders to risky borrowers were hit hard in 2006 and 2007 by the subprime mortgage crisis. Defaults began to significantly rise as home owners, who received previously-affordable adjustable rate home loans during the real estate boom, started grappling with higher loan rate resets. While some borrowers have weathered the rate crunch, many others have defaulted on their mortgage payments. As a result, many of the largest subprime mortgage lenders including, but not limited to, New Century Financial Corporation, Countrywide Financial Corp., Ameriquest Mortgage, HSBC Holdings plc and Fremont General Corp., began experiencing significant problems in their mortgage loan portfolios in 2006, with New Century Financial Corporation and Fremont General showing the greatest signs of distress.

In early 2007, many subprime mortgage lenders filed for voluntary bankruptcy protection, ceased originating mortgage loans and/or ceased conducting business altogether. Furthermore, many of these companies also face criminal investigations into their accounting and business practices.

[modifier] March 2007: Attempts to Gain Compensation

On March 13, 2007, the Wall Street Journal reported that "amid mounting defaults in the market for subprime mortgages, some big banks and mortgage companies are striking out in their efforts to wrest compensation from originators of those high-risk, high-return loans." According to the Wall Street Journal article, "banks and larger mortgage lenders are trying to force smaller mortgage lenders to buy back some of the same loans that the larger entities eagerly purchased from the smaller mortgage originators in 2005 and 2006, by enforcing what the industry calls repurchase agreements."

The article further stated that "HSBC is dispatching lawyers to U.S. courts to try to collect from mortgage originators, fighting over often-small amounts in a myriad of cases. Squeezed by the onslaught of defaults and repurchase demands, many originators such as SouthStar Funding, LLC and American Freedom Mortgage, Inc. have indicated that they cannot afford to buy back their loans or are pursuing bankruptcy protection.

The following message posted on the SouthStar Funding, LLC web site on April 2, 2007 is an example of what happened to many small mortgage originators and wholesale lenders during this period:

"SouthStar Funding, LLC sincerely regrets that it was necessary to cease its mortgage lending operations. The recent unprecedented downturn and policy changes in the mortgage industry necessitated this action. SouthStar appreciates its employees' and customers' loyalty to the company throughout the years."

Southstar Funding LLC filed for voluntary bankruptcy protection on April 11, 2007. Southstar Funding, LLC was created in 1998 when former executives from Homebanc Mortgage left to form their own company.

[modifier] US Congressional Inquiries

In the wake of the mortgage industry meltdown, Senator Christopher Dodd, Chairman of the Banking Committee held hearings in March 2007 and asked executives from the top five subprime mortgage companies to testify and explain their lending practices; Dodd said, "'predatory lending practices' endangered home ownership for millions of people. Lou Ranieri of Salomon Brothers, inventor the mortgage backed securities market in the 1970s, warned of the future impact of mortgage defaults: "This is the leading edge of the storm. … If you think this is bad, imagine what it's going to be like in the middle of the crisis." In his opinion, more than $100 billion of home loans are likely to default when the problems in the subprime industry appear in the prime mortgage markets.

[modifier] Spread to Alternative-A Sector

In early 2007, the so-called Alternative-A (Alt-A) mortgage sector, which loans to borrowers with better credit than subprime borrowers but not quite prime, also started to show signs of distress. The delinquency and default rate for Alt-A mortgages has been considerably less than for subprime mortgages, according to First American Loan Performance, a research firm based in San Francisco, California that looks at mortgage loans packaged into securities and sold to investors. The First American data showed that January 2007 payments were 60 days late on 14.3 percent of subprime loans, up from 8.4 percent a year earlier. The late-payment figures for Alt-A loans was 2.6 percent in January, up from 1.3 percent a year earlier. Alt-A borrowers traditionally have credit scores as high as prime borrowers, but often provide less documentation of their finances; in recent years, however, some Alt-A borrowers have had credit scores closer to subprime borrowers and still were not asked for full documentation.

Doug Duncan, chief economist for the Mortgage Bankers Association in Washington, D.C., said that Alt-A mortgages made up a small share of the U.S. market at about 6 percent of outstanding loans. Loans to prime customers, who are the most creditworthy, make up 74 percent; those to subprime borrowers are about 11 percent, and government-backed loans total about 9 percent. Duncan said he expected to see some increase in delinquencies and defaults in the Alt-A market this year, but said the bigger problem was that investors appeared less willing to invest in these loans because of the deepening subprime problems. That will be a factor in slowing mortgage origination in 2007 to an estimated $2.2 trillion from a peak of $3.9 trillion in 2003 and $2.5 trillion last year, Duncan said.

Companies that originate the Alt-A mortgages have found that investors are less willing to buy securities that are backed by mortgages — or are demanding significantly higher returns. One Alt-A lender, American Home Mortgage Investment Corporation of Melville, New York, announced in early April that it was having trouble selling its mortgages into the secondary market and would have to cut its earnings forecast for the quarter and the year. Other Alt-A lenders that have taken hits in the market in recent days are First Horizon National Corp. of Memphis, Tennessee, which some analysts predict may be forced to sell out to a bigger bank, and M&T Bank Corp. in Buffalo.

[modifier] June 2007: The crisis deepens

A June 1, 2007 report by Friedman, Billings, Ramsey Group Inc., a securities firm in Arlington, Virginia, indicated that a total of 11 percent of the loan collateral for all subprime mortgage bonds had payments at least 90 days late, were in foreclosure or had the underlying property seized. In May 2005, that amount was 5.4 percent.

On or about June 9, 2007, Democrats led by House Financial Services Committee Chairman Barney Frank blamed a lack of oversight by the Federal Reserve for allowing abuses in the subprime-mortgage market. Frank threatened to take away the Federal Reserve's legal power to write consumer-protection rules, telling an official the board must "use it or lose it." "If the Fed doesn't start to use that authority to roll out the rules, then we'll give it to somebody who will," Frank, a Massachusetts Democrat, told Federal Bank Governor Randall Kroszner during a committee hearing today in Washington.

Congressional overseers intensified pressure on the Federal Reserve over what they considered a lack of action on consumer protection. Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said on June 7 that he wanted the Federal Reserve to write tougher regulations to curb abusive mortgage lending. Dodd's pressure prompted the Federal Reserve to schedule a public hearing in Washington to examine its authority to write new consumer-protection rules in subprime mortgage lending.

On June 21, 2007, H&R Block Inc. reported that it swung to a quarterly loss as the challenging market for subprime mortgages continued to hurt results. The net loss reflected discontinued operations, primarily the company's mortgage business. H&R Block Inc. has announced that it is in the process of selling off its Option One and H&R Block Mortgage Corp. businesses, a transaction expected to be completed during the second quarter of fiscal 2008. "Conditions in the non-prime mortgage industry continued to be challenging during the 2007 fourth quarter," the company said in the earnings release. "Mortgage operations were particularly impacted by deteriorating conditions in the secondary market, where reduced investor demand for loan purchases, higher investor yield requirements and increased estimates for future losses reduced the value of non-prime loans," it said. "This was a really rough quarter for the subprime industry overall," said Chief Executive Mark Ernst.

On June 21, 2007, foreclosure data was released indicating that the number of residential mortgages going into foreclosure hit a record in the first quarter of 2007, with the biggest increases coming in the subprime market.

[modifier] Collapse of Bears Stearns Hedge Funds

In June of 2007, hedge funds involving collateralized subprime mortgage loans started showing signs of distress. On or about June 21, 2007, The Bear Stearns Companies, Inc. announced that it is preparing to shut down two hedge funds, Bear's High-Grade Structured Credit Strategies Enhanced Leverage Fund and High Grade Structured Credit Strategies Fund. This announcement led to concerns about the subprime mortgage sector and triggered worries that worse is yet to come.

"The unraveling of the Leverage Fund is at best an embarrassment for Bear Sterns, and at worst, it threatens to have a ripple effect on valuations across the subprime sector," Kathleen Shanley, an analyst at independent corporate bond research firm Gimme Credit, wrote in a recent report. Bear's two funds are close to being shut down after suffering deep losses from investments backed by subprime mortgages.

Creditor Merrill Lynch seized about $850 million of assets from the funds on June 20, 2007 and commenced selling some of those assets, according to Reuters. "Some guys made bad bets so we may see some more sellers out there," said Dan Castro, managing director at GSC Group in New York. "There isn't going to be a flood of hedge funds liquidating, but other guys are having problems."

The heady issuance of these risky subprime loans helped fuel the U.S. real estate boom and also provided a windfall to Wall Street firms, which have made big money packaging these loans and selling them as securities to investors like hedge funds. These so-called collateralized debt obligations are pools of securities that usually aren't heavily traded. A flood of supply into the open market could give them a hard value, which could force holders of these securities to mark down their value on their books, analysts say.

"These instruments are held by a very large number of accounts - not just hedge funds, but all sorts of investment vehicles - that thereby highlights the hit everyone is taking from this process," said Charles Diebel, an analyst at Nomura International in London. Beyond losses, there are also concerns that investors may lose their appetite for risky bonds and loans and reduce the availability of financing for leveraged buyouts. The U.S. Securities and Exchange Commission reported that it is keeping a close eye on the fate of the Bear Stearns funds amid concerns of any "potential systemic fallout."

Similarly, on July 3, 2007, United Capital Asset Management announced that it has temporarily suspended payments from four of its Horizon funds following losses from its investment in subprime mortgage bonds.

[modifier] July 2007: Criticism and Changes to Subprime Ratings

On July 10, 2007, Standard & Poor's said it may cut credit ratings on $12 billion in bonds backed by subprime mortgages because losses will rise beyond its previous expectations. The e-mailed statement indicated that ratings of 612 classes of residential mortgage-backed securities were placed on CreditWatch with negative implications. The bonds represent 2.1 percent of the $565.3 billion of similar bonds rated by Standard & Poor's during 2006. "We expect that the U.S. housing market, especially the subprime sector, will continue to decline before it improves, and home prices will continue to come under stress," Standard & Poor's said. "Weakness in the property markets continues to exacerbate losses, with little prospect for improvement in the near term." Investors have criticized Standard & Poor's, Moody's Investors Service and Fitch Ratings because their ratings on bonds backed by mortgages to people with poor or limited credit don't reflect the fastest default rate in a decade. Prices of some bonds backed by subprime mortgages have declined by more than 50 cents on the dollar in the past few months while their credit ratings haven't changed. Standard & Poor's announced on July 12, 2007 that it downgraded $6.39 billion of subprime residential mortgage-backed securities.

Hours after Standard & Poor's announcement on July 10, 2007, Moody's Investors Service announced that it has cut its ratings for 399 residential mortgage-backed securities, citing higher-than-expected delinquencies in the underlying loans. Moody's Investors Service has an additional 32 securities under review for possible downgrade. The securities were originated in 2006, are backed mostly by first lien adjustable and fixed rate subprime loans, and their downgrades would affect a total of $5.2 billion in debt.

The announcements by Standard & Poor's and Moody's Investors Service on July 10, 2007 led to the dollar's sell-off. The dollar weakened broadly on July 11, 2007, striking a record low versus the euro and a 26-year trough against sterling as growing fears surrounding the U.S. subprime mortgage and credit sectors gripped financial markets, concerns heightened after two ratings agencies issued warnings on more than $17 billion of debt linked to risky mortgages, made investors less willing to take on risk (see above).

On July 11, 2007, benchmark ABX indices opened lower following the prior day's sharp selloff and record low close, after major credit rating agencies started to cut ratings on $17.3 billion of subprime mortgage securities (see above). The ABX 07-1 "BBB-" index, which is tied to loans made to risky borrowers in the second half of 2006, opened the July 11, 2007 session at 50.50, falling below the prior day's record low close of 51.42. The index hit an intraday low of 49 bid during the prior session before recovering. "The market is nervous after yesterday's massive selloff on the rating actions. We're opening weaker," an ABX trader said. ABX, used by investors to hedge subprime mortgage bets, tumbled on Tuesday after Moody's Investors Service and Standard & Poor's weighed in with rating actions. The ABX 06-2 index, which references loans from 2006's first half, traded at 58, down from 58.58 at the prior close.

[modifier] July 2007: Fair Mortgage Practices Act

On July 12, 2007, the top Republican on the U.S. House Financial Services Committee introduced legislation that would create a national registry and set new standards for mortgage originators in response to the subprime mortgage crisis. Spencer Bachus, of Alabama, said in a statement that his bill, called the Fair Mortgage Practices Act, would curb unscrupulous lending and increase consumer protections. The bill would set licensing standards for mortgage loan originators and log those lenders in a national registry. Loan originators would have to submit to a criminal background check and FBI fingerprinting, and loan originators convicted of fraud would not qualify under the new licensing standards, according to the legislation. The bill also would require mortgage lenders to weigh a borrower's ability to repay the loan and would restrict penalties against homeowners who refinance out of a high-cost loan.

[modifier] Further Collapses: American Home Mortgage Investment & HomeBanc

On July 31, 2007, American Home Mortgage Investment Corporation announced that it can no longer fund home loans and may liquidate assets, putting its survival in doubt. On August 3, 2007, American Home Mortgage Investment Corporation announced will close most operations on August 3, 2007 and said nearly 7,000 employees will lose their jobs as the lender becomes one of the biggest casualties of the U.S. housing downturn. On August 6, 2007, American Home Mortgage Investment Corporation filed for Chapter 11 bankruptcy protection. American Home Mortgage Investment Corporation originated $59 billion in loans in 2006. The company offered many "Alt-A" mortgages, which fall between prime and subprime in quality; however, about half of those mortgages were adjustable-rate loans and it has made many loans that allow borrowers to produce little documentation of income or assets. It recently commanded about 2.5 percent of the U.S. mortgage market.

On August 7, 2007, HomeBanc Corp., the Atlanta-based lender that has been hit hard by the housing downturn, announced that it is closing its mortgage loan business. HomeBanc Corp. said it is unable to borrow on its credit facilities and was unable to meet its mortgage loan funding obligations as of August 6, 2007. "Accordingly, the company does not anticipate funding any future mortgage loans and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated but not yet funded," HomeBanc Corp. said in a statement. "The company is seeking the most appropriate course of action to preserve the value of its remaining assets." HomeBanc Corp. said it is selling certain retail loan assets, including as many as five branch locations in Georgia, Florida and North Carolina, to Countrywide Financial Corp.

[modifier] Causes

Rising real estate values emboldened lenders to take more risks and to relax their credit criteria. Subprime lenders made too many loans to borrowers who did not make enough money to make the monthly payments. In some cases, lenders did not even bother to verify borrowers' incomes and/or assets by using so-called "stated loans" and "No Income No Asset" loans which do not require verification of income and/or assets. Wall Street encouraged this behavior, too, by bundling the loans into securities that were sold to pension funds and other institutional investors seeking higher returns. Borrowers have also been criticized for entering into loan agreements they could not meet.

It took a while for the problems to surface because many of the subprime and Alt-A mortgages carried artificially low interest rates during the first few years of the loan. The delinquency rate on subprime mortgages eventually reached and exceeded 12.6 percent. Some of this trouble might have been avoided if home prices had continued to climb like they did between 2000 and 2005. As a home appreciates, even borrowers who aren't paying the principal loan amount build up more equity. That in turn would have made it easier for subprime borrowers to refinance into yet another loan with a low interest rate. Since home prices have weakened in many parts of the country and lenders are being more vigilant, refinancing is not an option for many subprime borrowers facing dramatically higher payments. The rates on an estimated $265 billion in subprime mortgages are scheduled to be reset sometime in 2007. Some of those borrowers could be facing interest rates as high as 12 percent if they are not able to refinance.

On May 17, 2007, Federal Reserve Chairman Ben Bernanke laid some of the blame for the rise in mortgage delinquencies on loose lending practices. "As the underlying pace of mortgage originations began to slow, but with investor demand for securities with high yields still strong, some lenders evidently loosened underwriting standards," he said. The practice of rewarding loan officers for high loan volume and intense competition for mortgage business among lenders may have also helped weaken standards, he added. However, as problems have come to light, the Fed has seen "signs of self-correction" in the form of tighter underwriting standards and wider credit spreads on securitized subprime loans, Bernanke said. "Markets can overshoot, but, ultimately, market forces also work to rein in excesses," he said. The central bank sees no sign of spillover to banks or thrifts from subprime problems, he added. While the supply of credit to the subprime market has slowed, credit "has by no means evaporated," Bernanke said.

[modifier] Foreclosures and federal response

On April 11, 2007, amid continued signs of deterioration in the nation’s mortgage market, a Congressional panel forecast a sharp rise in housing foreclosures, and several Democratic lawmakers called for a federal bailout for borrowers who are at risk of losing their homes. As hundreds of billions of dollars worth of loans sold to so-called “subprime” borrowers are now “resetting” to higher monthly payments, many of these borrowers are facing default.

The Joint Economic Committee of Congress provided a detailed report on the impact of those foreclosures on local communities — some of which are getting hit harder than others, according to the report. The Committee indicated that the areas expected to be hardest hit include Atlanta, Indianapolis, Denver, Dallas and Detroit. In the latter city, one of every 21 mortgages foreclosed last year, according to the report, which used statistics from RealtyTrac's foreclosure database. In 2006, more than 1.2 million foreclosure filings nationwide were recorded by RealtyTrac, a Web site that compiles default notices, auction sales and bank repossessions. That represents an increase of 42 percent from 2005. Based on filings for the first two months of 2007, RealtyTrac’s CEO James J. Saccacio forecast a 33 percent rise in foreclosures this year.

At a press conference held to present the findings, Senator Charles Schumer said the U.S. government should offer hundreds of millions of dollars to help troubled borrowers avoid losing their homes. "The federal government can send in an infusion of (money) to prevent foreclosure," said Schumer. Schumer was joined by Senators Robert Menendez and Sherrod Brown. "All three of us are on the banking committee ... We will be proposing significant amounts of dollars to go here and do this. Could not tell you how much, but in the hundreds of millions of dollars for sure. Maybe more than that," Schumer said.

Economists say bailout could have the effect of causing more defaults. "If the plan is to pay off loans when people quit, then I plan to quit paying my loan," says Michael Englund, chief economist at Action Economics. What's more, some economists say a bailout could encourage more risky lending in the future. "A bailout would validate what some of these lenders and borrowers did, which we now understand was reckless," says Carl Tannenbaum, president of the National Association of for Business Economics. "I don't think that's what we want to do."

In a speech before the Federal Reserve Bank of Chicago on May 17, 2007, Federal Reserve Chairman Ben Bernanke outlined the background and run-up to the present crisis in subprime lending and gave his view of what adjustments government regulators needed to make to minimize the scope and severity of subprime mortgage problems. Although he stressed that regulators should take the lead in combating abusive lending practices, he clearly did not want to throw out the baby with the bath water. "We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers," Bernanke said. "At the same time, we must be careful not to inadvertently suppress responsible lending or eliminate refinancing opportunities for subprime borrowers. "Any new rules that we issue should be sharply drawn," he added. "Insufficiently clear rules could create legal and regulatory uncertainty and have the unintended effect of substantially reducing legitimate subprime lending."

Chairman Bernanke stressed that there is much that regulators can do: Work with lenders to make sure disclosures about loan terms and fees are understood by borrowers; prohibit abusive, unfair and predatory lending practices; offer guidance and supervisory oversight and take informal actions like encouraging sound practices and working with credit counseling organizations to better educate consumers. But, according to Bernanke, the kinds of innovations in credit markets represented by exotic subprime loan products have had a positive effect, opening up home-buying opportunities for millions of Americans. During the years when subprime products came into wider use, home ownership has expended from about 65 percent of all Americans in 1995 to 69 percent today, he said. The increase in home ownership also coincided with the expansion of secondary markets in which mortgage loans were packaged and sold to investors.

"Markets can overshoot, but, ultimately, market forces also work to rein in excesses," Bernanke stated. "For some, the self-correcting pullback may seem too late and too severe. But I believe that, in the long run, markets are better than regulators at allocating credit." And while he advocated that regulators maintain their vigilance in fighting against fraud and abusive lending, that came with a caveat. "We must be careful not to inadvertently suppress responsible lending or eliminate refinancing opportunities for subprime borrowers," he said. "Our success in balancing these objectives will have significant implications for the financial well-being, access to credit, and opportunities for home ownership of many of our fellow citizens."

The Fed and other agencies have encouraged lenders to contact borrowers to discuss possible options before scheduled rate resets, Chairman Bernanke said. "Many homeowners do not understand that lenders also want to avoid foreclosure," he said.

On June 5, 2007, Bernanke once again acknowledged that problems in the subprime market can be traced in part to loose standards, which in some cases allowed people to get mortgages with little documentation and again said the Fed will consider tougher rules to crack down on abusive practices and improve disclosure. However, he reiterated that "[i]n deciding, we must walk a fine line: We have an obligation to prevent fraud and abusive lending; at the same time, we must tread carefully so as not to suppress responsible lending or eliminate refunding opportunities for subprime borrowers."

On June 28, 2007, banking regulators completed guidelines that call on lenders to strictly evaluate borrowers' ability to repay home loans.^[3] The guidance issued by the Federal Reserve, Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency and the Office of Thrift Supervision comes in response to an increasingly troubled housing market. Home prices have been falling and mortgage defaults have been rising, especially among so-called subprime mortgages given to buyers with shaky credit. The standards, which are voluntary and only apply to federally regulated lenders, calls for verification of borrowers' incomes in most cases. Consumers should have clear disclosures of their mortgage terms and should have at least 60 days to refinance a loan that is about to jump up to a higher rate without penalty. In a prepared statement, Federal Reserve Governor Randall S. Kroszner said "it's only good business sense for the lenders and it is the right thing to do for the borrowers' sake." While the guidelines would not affect state-regulated mortgage companies, many state banking regulators are expected to follow suit.

On July 12, 2007, the top Republican on the U.S. House Financial Services Committee introduced legislation that would create a national registry and set new standards for mortgage originators in response to the subprime mortgage crisis. Spencer Bachus, of Alabama, said in a statement that his bill, called the Fair Mortgage Practices Act, would curb unscrupulous lending and increase consumer protections. The bill would set licensing standards for mortgage loan originators and log those lenders in a national registry. Loan originators would have to submit to a criminal background check and FBI fingerprinting, and loan originators convicted of fraud would not qualify under the new licensing standards, according to the legislation. The bill also would require mortgage lenders to weigh a borrower's ability to repay the loan and would restrict penalties against homeowners who refinance out of a high-cost loan.

[modifier] Impact on broader economy

In a worst case scenario, the wave of anticipated defaults on subprime mortgages and tighter lending standards could combine to drive down home values. That could make all homeowners feel a little less wealthy, contributing to a gradual decline in their spending. Less consumer spending eventually weakens the economy, prompting companies to start laying off workers in a vicious cycle that causes households to become even more frugal. "There could be some negative psychological effects to all this," said Standard & Poor's subprime mortgage analyst Stuart Plesser. Edward Leamer, an economist with the UCLA Anderson Forecast, doubts home prices will fall dramatically because most owners won't have to sell. Still, he predicts home values will remain flat or slightly depressed for the next three or four years. "There are going to be a number of borrowers feeling a lot of distress," he said. However, others say that this will contribute to a weakening of the housing market and certain stocks involved. Specifically referencing not to invest in Subprime interest bearing bonds, Joseph Parnes, President of Technomart Investment Advisors, and noted short seller stated that "these bonds were based on a lacking track record, and were destined to fail. We were always skeptical and shorted those companies involved."

Waves of mortgage delinquencies should not seriously hurt the economy even though loan foreclosures are likely to rise even more this year and next, Federal Reserve Chairman Ben Bernanke said on May 17, 2007. Bernanke, speaking at the Chicago Fed's 43rd annual bank structure conference, noted that home sales have slowed again after showing some stability late in 2006, and that problems with subprime mortgages have occurred against a backdrop of slower overall growth. "The effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system," he said.

On June 5, 2007, Bernanke repeated his belief that troubles in the subprime mortgage market are "unlikely to seriously spill over to the broader economy or the financial system."

On June 21, 2007, Treasury Secretary Henry Paulson said that woes in the subprime mortgage sector will take time to unfold and will cause losses, but won't derail the U.S. economy. When asked about the two Bear Stearns hedge funds which have been battered by turmoil in the subprime mortgage market (see above), Paulson said he would only comment in general terms. "I tried to make clear we will be dealing with the subprime issue for some time and that there will be losses along the way. It is a natural outgrowth of what we've seen in the housing market and certain lending practices," Paulson said. "As mortgages continue to reset, this will take time to work its way through the system," he said. "But I continue to believe that this risk is largely contained. It doesn't pose a significant risk to the economy overall," he said.

On a positive note, the subprime meltdown could be a correction of the abnormally thin spreads over risk free Treasury yields prompted by yield hungry investors who ignored the risks of corporates and private equity debt funding and accept low returns. The summer of 2007 has seen a return to slightly higher spreads. The higher more normal spreads have returned to jumbo mortgages (loans in excess of the $417,000 FHA limit for conforming loans.)

je confirme ^^ Ico Bla ? 10 août 2007 à 13:25 (CEST)