Ben Bernanke, chairman of the US Federal Reserve, said on Monday that regulators were “intensively” probing banks’ foreclosure practices and expected to produce results next month. Some of the largest US banks have halted moves to claim back homes from borrowers after it emerged that they had cut corners in preparing paperwork; state attorneys general are investigating allegations of fraud.
The Fed chairman told a conference on the future of housing finance that regulators were “looking intensively at the firms’ policies, procedures, and internal controls … and seeking to determine whether systematic weaknesses are leading to improper foreclosures”.
The impact of foreclosure documentation problems on the housing market is “still uncertain” and may cast a cloud over the sector for “the foreseeable future”, said William Dudley, president of the Federal Reserve Bank of New York.
Mr Dudley, a member of the Fed’s policy-setting Federal Open Market Committee, is a supporter of further monetary easing, saying recently “further action is likely to be warranted” by the central bank. This was interpreted as a sign that purchases of US Treasuries by the Fed – quantitative easing – would step up in November.
Short-term interest rates in the US have turned negative. This might mean imminent disaster or it might be traders chasing safe investments as they look to secure end-of-year profits – choose between numerous explanations.
There are also competing explanations for the rise in US mortgage delinquency rates. Most of the rise is in people who are extremely late on their payments, rather than just a little: