Bernanke Forecasts $100B in Subprime Losses

Federal Reserve Board Chairman Ben S. Bernanke says he expects that foreclosures on $1 trillion in subprime adjustable-rate mortgages will lead to at least $100 billion in losses, and it could go much higher. "So far, I see about $100 billion, but it certainly could be several multiples of that as we go forward and delinquency rates and foreclosure rates rise," the Fed chairman told the House Budget Committee. He noted that there are 5 million subprime ARMs, of which 20% are delinquent. The Fed chairman also testified that home prices are falling in many parts of the country. "The virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already-elevated inventory of unsold homes," he said.