The Foreclosure Report

Prepare For Higher Losses Lenders: FDIC

Reuters has this report on a FDIC official. "Residential mortgage lenders should be prepared for an increase in credit losses as interest rates rise and pull the reins on a years-long boom in the U.S. housing market, the chairman of the Federal Deposit Insurance Corp. said on Tuesday."

"Donald Powell said record home price increases have led to nontraditional mortgage products, such as loans that require little documentation and interest-only loans. But as interest rates begin to climb, borrowers will face higher debt service on some of those products."

"'Credit losses are very low now, but mortgage lenders need to be prepared for higher losses,' Powell said. Powell said bank regulators are evaluating the risk to lenders, and would issue guidance where appropriate."

"The U.S. housing market has expanded for five years, with home sales and construction striking annual records. In some areas, home prices have climbed by double-digit percentages on an annual basis."

"The FDIC said it has never seen as many metropolitan areas experiencing a housing boom simultaneously, and estimated that the 'boom cities' include about 40 percent of the value of all U.S. residential real estate."

posted by Ben Jones @ 12:36 PM