Howard Glaser, a mortgage industry consultant and former counselor to the secretary of Housing and Urban Development during the Clinton administration, told CNBC’s “Squawk Box” that it’s not clear if the troubled subprime market threatens the rest of the mortgage industry.
“No one wants to pull the alarm bet just yet, but there is cause for concern,” he said Friday.
Glaser said the subprime sector represents about 20% of the market and solid, conventional loans with fixed rates represent about 30%.
“It’s the area in the middle that raises some concern because in that area we’ve seen a tremendous growth of exotic mortgage products,” Glaser said.
He said many types of mortgages offered to borrowers in the middle didn’t exist a few years ago, including option ARMs and interest-only loans.
This may mean that some borrowers may not be able to get new loans in the future, defaults may rise and some owners may not be able to sell their houses and trade up. Foreclosures would add downward price pressure in the housing market.
“The housing sector could get hit from both ends,” Glaser said.