The Senate Banking Committee grills top regulators and several of the nation's largest lenders about problems with sub-prime mortgages — and what regulators did and did not do to address them.
The session represented the first time that some of the central figures in the current mortgage meltdown gathered in one place. It included representatives from the Comptroller of the Currency, the Office of Thrift Supervsion, the FDIC and the Federal Reserve, along with at least one state regulator.
Federal regulators like to point out that most of the subprime lending takes place outside of federal jurisdiction. But the Federal Reserve's Roger Cole acknowledges the central bank should have done more to prevent reckless lending.
The latest figures show 14 percent of outstanding subprime loans are now more than 30 days delinquent.
But consumer lawyer Irv Aklesberg said that figure may be just the tip of the iceberg.
"The closing foreclosure crisis should not be a surprise to anyone," Aklesberg said, "expect perhaps for the magnitude.
"What we're seeing, I believe, is a runaway train that is only starting to gather speed. These recent foreclosures reflect large numbers of early payment defaults — that is, homeowners defaulting before the fixed-rate periods on their loans expire and the adjustments kick in."
For now though, the mess in the subprime market remains fairly well contained. There is still a downturn in the broad housing market, but there is not much evidence that the subprime problems are spilling over in a way that could push the overall economy into a recession.
People in the financial markets — and millions of homeowners — will be watching nervously to see if that remains true.
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