OCC Economist Cautious About 'Bubble'

The chief economist of the Office of the Comptroller of the Currency is not so sure rising housing prices and the proliferation of exotic mortgage products necessarily add up to a housing bubble.There are many features of this housing boom that are different from others that ended in recession and declining house prices, Deputy Comptroller Nancy Wentzler told reporters June 22. "There are fundamentals that suggest there are some reasons for the prices we are seeing," she said. Just because banks and nonbanks are offering new instruments, such as interest-only loans and option adjustable-rate mortgages, "doesn't mean they are bad," she said. "The question is how do they perform." She stressed that this is not a simple issue and that it deserves careful study and better analysis. Simply looking at the raw data is not enough, and it could lead to "inappropriate" judgments, she said. Ms. Wentzler is working with bank supervisors at the OCC in assessing the risks associated with IO loans and option ARMs. The OCC plans to issue guidance on these loans to national banks and examiners in the fall.