Bernanke: More Subprime Woes Ahead

The rate of serious delinquencies and foreclosures on adjustable-rate subprime mortgages has doubled since mid-2005 and it is going to get worst, according to Federal Reserve Board chairman Ben Bernanke.The chairman noted in a speech to an International Monetary Conference that the default rate on subprime ARMs has risen to about 12%. "We are likely to see further increases in delinquencies and foreclosures this year and next as many subprime adjustable-rate loans face interest-rate resets," Mr. Bernanke said. The Fed chairman also expects the tightening of subprime lending standards will lead to a further contraction in subprime originations and continue to act as a restraint on housing demand and sales. National Mortgage News survey data show that subprime originations declined by 16.4% in 2006 to $665 billion and a larger drop is expected this year.