At the 1st Asia-Pacific Housing Forum in Singapore, Department of Housing and Urban Development Assistant Secretary Darlene Williams played down housing fears and expressed her support for the recent Fed action and subprime lending.
Williams noted that the recent half point Fed rate cut was a sign that the Central Bank was taking serious action to support the economy.
“The hope is that the Fed rate cut would send the signal that government is concerned and willing to continue to analyze the situation so that the market can relax,” Williams said.
Williams also expressed that the economy was relatively strong, and that loan defaults were beginning to stabilize.
“Our economic fundamentals are strong. Loan defaults are half of what they were in the 1980s and interest rates are low compared to the double-digit rates of 20 years ago,” she said.
Interestingly enough, Williams also showed strong support for subprime lending, saying the under-fire lending bracket plays an important role in the possibility of home ownership.
“Subprime mortgages democratize credit, and so we don’t want to throw that option away,” she said. “Not all of these loans result in foreclosures.”
According to Williams, roughly 5% of all U.S. mortgages are subprime, and only a fifth of those loans are at risk of default.
The assistant secretary is likely referring to lower-risk subprime mortgages, those which can be purchased by government sponsored entities such as Fannie and Freddie.
She strongly opposes predatory lending, and said the government “must take every step” to protect low-income and minority borrowers.
Williams also said she supported increased financial literacy and FHA reform, hoping U.S. Congress would pass the bill to allow more at-risk borrowers to gain assistance amid the current resetting loan environment.