Greenspan heightens warning on risky mortgages

Greenspan heightens warning on risky mortgages: "Greenspan heightens warning on risky mortgages
WASHINGTON -- July 21, 2005 -- Federal Reserve Chairman Alan Greenspan cautioned yesterday that certain types of increasingly popular, risky home mortgages could be 'disastrous' for some borrowers betting on ever-rising house prices.
'There's potential for individual disaster there,' Greenspan told the House Financial Services Committee. It was his strongest warning yet about the potential pitfalls for consumers and lenders in the nation's red-hot housing market.
Greenspan also warned lenders to 'fully appreciate the risk that some households may have trouble meeting monthly payments as interest rates and the macroeconomic climate change.'
Greenspan discussed the housing market while delivering an upbeat assessment of the overall economy in his semiannual report to Congress. Employment, retail spending and business investment have all risen in recent months, he noted.
'The U.S. economy has remained on a firm footing, and inflation continues to be well contained. Moreover, the prospects are favorable for a continuation of those trends,' he said."