Released: August 30, 2007

Bernanke: Need new mortgage options

Source: Associated Press [USA Today]

Federal Reserve Chairman Ben Bernanke suggested that policymakers look for ways to encourage a wider range of mortgages geared for borrowers who have been hard hit by the housing slump and credit crunch.

Bernanke, in a letter to Sen. Charles Schumer, D-N.Y., released Wednesday, said the Fed is keeping close tabs on financial markets and is “prepared to act as needed” to make sure spreading credit problems that have rocked Wall Street in recent weeks don’t hurt the economy. It’s a message the central bank has been sending in recent weeks as the markets have grown more turbulent.

Foreclosure and late payments have spiked especially for “subprime” borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or keep up with their monthly mortgage payments. Some overstretched homeowners can’t afford to refinance or even sell their home.

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