Risky loan failures seen minor to economy

Chicago -- An expected rise in homes lost to mortgage foreclosures this year probably won't hurt the U.S. economy, Federal Reserve Chairman Ben Bernanke said.

In a Thursday speech in Chicago, Bernanke said most of the people in that category, concentrated in the market for adjustable-rate loans to subprime borrowers, have spotty credit histories, low incomes or other risky factors, The Washington Post reported.

The rate of foreclosure in those mortgages recently reached about 11 percent, twice the lever in mid 2005, he said, and likely will continue going up through the next 18 months.

However, he said, "We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

Bernanke suggested regulators may need to do more to protect consumers from deceptive and abusive lending practices, which he said appear to have contributed to the subprime market problem.

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