Federal Reserve Knew of Serious Subprime Problems In 2006

This may come as a shocking revelation to many of our readers. The Federal Reserve, and specifically the Federal Reserve Bank of Boston, already had data about subprime mortages. That data did not look good at all. Executives from specific lenders were called to testify before the Senate Committee on Banking, Housing, and Urban Affairs on March 22, 2007. While we might not be able to trust the executive spin this shocking data from the Fed is real:

Research by the Federal Reserve Bank of Boston on the rising tide of foreclosure filings in the state found that subprime loans are a major culprit. While subprime loans make up 12 percent of all mortgages in the state, they accounted for more than two-thirds of foreclosure filings in the third quarter of 2006, the most recent data available . Most delinquencies were high-interest subprime loans with adjustable rates, which increase payments as interest rates rise. Homeowners hit the hardest were in the working-class cities of Brockton, Springfield, Lawrence, Fitchburg, and Lowell, the Fed said. The trend is very disturbing, said Richard Walker, Boston Fed vice president. “We’re monitoring it closely.”