Mortgage Crisis will be extended, Fed chief says

US mortgage crisis will be extended, Fed chief says
Washington - More US homeowners are likely to default on risky loans over the coming months, extending uncertainty about US economic growth, Federal Reserve head Ben Bernanke said Friday.
The US central bank "stands ready to take additional actions as needed" to fight turmoil in financial markets caused by the meltdown of much of the US subprime mortgage market, the Fed chief said."Global financial losses have far exceeded even the most pessimistic projections of credit losses on those loans," he said in a speech in Wyoming.In a strong indication of government worry over the roiling US mortgage crisis, US President George W Bush was preparing later Friday to propose a federal aid programme for high-risk borrowers and low-income homeowners.Bernanke made plain there would be no Fed bailout for failing lenders or investors stuck with losses, saying that "is not the responsibility of the Federal Reserve."He gave no sign of whether the Fed might cut its benchmark interest rate to help boost the US economy"Inevitably, the uncertainty surrounding the outlook will be greater than normal," he said at an economic conference.Lenders have pushed subprime loans to the least creditworthy borrowers, helping many Americans buy homes and driving up home prices in the last few years.A sharp slowdown in US homebuilding, a drop in home values and rising interest rates have forced many of those homeowners to default on their mortgages, squeezing the financial companies that made the loans and leading to a broader, global credit crunch.Bernanke warned that the crisis was far from over."With many of these borrowers facing their first interest rate resets in coming quarters, and with softness in house prices expected to continue to impede refinancing, delinquencies among this class of mortgages are likely to rise further," he said.And the number of unsold new US homes remains high, "suggesting that further declines in homebuilding are likely," he said. dpa