Signs Suggest Housing Slump May Drag On
Tuesday, September 18, 2007; 7:09 PM
LOS ANGELES -- Soaring foreclosure filings and sagging expectations of future home sales among developers raised prospects Tuesday that the worst housing slump in 16 years could drag on into next year.
Chief executives of some of the nation's largest housing and mortgage lending companies echoed the gloomy national picture while detailing steps being taken to cope with the problems.
Countrywide Financial Corp.'s Chairman and Chief Executive Angelo Mozilo delivered a bullish outlook on his company's future but called on the government to do more to ease the credit crunch and help borrowers in distress avoid foreclosure.
"It is imperative that liquidity return to the mortgage market and that the tide be turned in order to stabilize home prices," he said during an investors conference in San Francisco.
"A failure to do so will not only imperil the financial lives of hardworking American families but will inevitably impact our broader economy," he said.
The Federal Reserve provided some help by lowering its federal funds rate a half-point to 4.75 percent _ the first cut in more than four years.
The move means borrowers who can obtain credit should see rates drop on a variety of loans. It will become less expensive for people to finance certain credit card debt and for homeowners to take out popular home equity lines of credit.
And, it will provide relief to some homeowners whose adjustable rate mortgages reset in the fall. Those rates will still go up but not by as much as they otherwise could have, analysts said.
It also means interest rates on adjustable rate mortgages that are scheduled to reset won't go up as much, easing the potential for severe payment shock and more defaults on subprime loans to borrowers with shaky credit.
Mortgage lenders and Wall Street had been lobbying hard for the Fed to cut rates.
Even so, Robert Toll, CEO of Horsham, Pa.-based homebuilder Toll Brothers Inc., said the Fed's action wouldn't resolve the subprime mortgage crisis that has put the brakes on a housing market rebound.
Speaking at a separate investor conference, Toll said a return to conventional underwriting standards by lenders would make a difference. He also warned that the housing market has yet to see its worst days.