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April 21, 2008
UMBC Forum Looks ‘Beyond the Housing Crisis’
Marc Steiner to moderate panel featuring Federal Reserve economists and Md. Secretary of Labor Tom Perez
FOR IMMEDIATE RELEASE
CONTACT: Kavan Peterson
BALTIMORE – UMBC and the Federal Reserve Bank of Richmond will host a panel discussion April 28 exploring how the subprime mortgage meltdown has spilled into the financial sector and shaken everything from local neighborhoods to the U.S. and global economy.
Baltimore radio personality Marc Steiner will moderate a panel at UMBC’s campus featuring three Federal Reserve Bank financial experts and Maryland’s Secretary of Labor, Licensing and Regulation, Thomas E. Perez. The event, “Beyond the Housing Crisis: Understanding the Subprime Mortgage Meltdown’s Increasing Impact on the U.S. Economy,” will be held in the Engineering Building, Lecture Hall 5, from 5:30 to 7 p.m., followed by a reception. For directions and information visit: http://www.umbc.edu/pubpol/subprime
The forum is a rare public event featuring Federal Reserve financial experts, including Robert E. Carpenter, a professor of economics at UMBC and a Senior Financial Economist at the Federal Reserve Bank of Richmond; Dale T. Klein, a Senior Financial Analyst at the Federal Reserve Bank of Richmond; and Breck Robinson, a visiting scholar at the Federal Reserve Bank of Richmond and an associate professor at the University of Delaware in the School of Urban Affairs and Public Policy.
The panel will address core economic problems stemming from the housing crisis, including issues such as:
• How defaults in subprime mortgages brought Wall Street to its knees and continue to threaten the worst financial crisis since the Great Depression.
• How Maryland political leaders are addressing skyrocketing foreclosures across the state.
• How the current housing crisis compares with previous housing market downturns.
• How the lending crisis is putting a strain on local and state government finances.
According to Klein, an expert on financial trends in the housing and commercial real estate markets, defaults in adjustable-rate subprime loans are at 21.7 percent and rising as of December 2007, compared with 13 percent at the height of the last recession in 2002. Defaults in prime adjustable-rate loans are also up sharply to 6.09 percent in December 2007, compared with a 4 percent peak in 2002.
“By any indicator the current housing downturn far exceeds damage to housing markets experienced during the last recession,” Klein said.
In addition, problems in the housing market now are threatening to spill into the commercial real estate and construction market, which could have a crippling impact on the economy, Klein said. Such a downturn may be “the next shoe to drop in the subprime meltdown,” he said.
Carpenter, an expert on structured finance markets, will address the complex “securitization” process, which is one of the core problems that has staggered Wall Street. Securitization is the process by which mortgage lenders can pass the risk of defaults to investors by repackaging and selling loans as “mortgage-backed securities.” According to Carpenter, fallout from defaults in subprime mortgages have now spiraled into many other asset markets and created a global problem.
“The subprime meltdown is an ongoing economic problem that has spread throughout Wall Street and the global financial sector,” he said.
Homeowners and commercial real estate developers aren’t the only ones having trouble getting loans, said Robinson, who is an expert on state and local government finances.
“It’s getting just as hard for your local government to get a loan as it is for you,” Robinson said.
Robinson will discuss how the credit crunch caused by the subprime meltdown is putting increased pressure on state and municipal finances by damaging the credit-worthiness of municipal bond insurers. This damage results in rising borrowing costs for communities and declining interest rates, which makes it difficult for governments to finance deficit spending.
Perez will address the housing crisis in Maryland and legislation recently signed into law by Gov. Martin O’Malley intended to provide immediate aid to homeowners facing foreclosure and prevent future housing crises. The new measures will lengthen the foreclosure process in Maryland by 150 days, toughen criminal penalties for mortgage fraud and reform predatory lending practices.
Posted by kavan at April 21, 2008 4:00 PM