Federal Reserve Chairman Ben Bernanke Wednesday offered a Congressional committe reassuring words about the fallout of the subprime mortgage mess but was less certain about the health of the overall hosuing market.
Speaking before Congress' Joint Economic Committee, Bernanke said problems in the subprime lending mess' "impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained."
On the other hand, developments in the subprime mortgage market had raised additional questions about the housing sector, whose near-term prospects "remain uncertain" and raise "some additional questions about the housing sector,"
Bernanke's testimony was his most extensive to date on the mounting problems in the mortgage lending market and follow signs that the housing slump is deepening, not bottoming out, as some industry observers had thought.
In recent days the National Association of Home Bulders lowered its sales forcast of existing homes, saying the sector would register an 8% decline this year. That followed an earnings warning Monday from Lennar, one of the nation's lartgest homebuilders, and another decline in new home sales in February.
Meanwhile, the head of the Mortgage Bankers Association told a different Congressional panel on Tuesday that subprime lenders had made mistakes as well as misled borrowers while calling for an regulatory overhaul.
"Although the turmoil in the subprime mortgage market has created financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear," Bernanke said.
So-called "subprime" lenders who make home loans to people with blemished credit histories or low incomes have been battered. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments. Delinquencies and foreclosures in the subprime mortgage market are soaring.