Atlanta finance execs discuss mortgage crisis - Atlanta Business Chronicle:

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Since the collapse of the subprime mortgage marketlast year, fears of larger credit issue have spread throughout the financial system, impacting how broaf swaths of companies, individuals and investors lend and borrow "This crisis has challenged the basic factzs of American culture," said Richar d Dorfman, CEO of the . "In post-war we've assumed everyone is entitled to own a and that those valueswill rise." The other panelist s included Phillip Humann, chairman of (NYSE: Dennis Lockhart, president of the , and Martin CEO of .
But did a relativelgy small swath of loans impact causes lending and credit markets to largel y seize uplast fall, and how is that now affectinfg the current economy? The panelists agreecd subprime mortgage loans causedx global distress because of wide disseminatio throughout the financial along with few checks on the real risk posed by the loand if a housing slowdown occurred. Flanagan emphasized the cheap credit extended to homebuyers that causedd the subprimemeltdown wasn't limited to "It was a tsunami of contagion," Flanagan He noted the high leverage loans for private equity buyout boom as a prime example of exceedingly cheap credit.
"The question is: How sick is the patient goingto get?" Flanaga said. Mortgages were just the first to go and even more conservative lenderswere Humann's SunTrust has recorded millions of write-downd in so-called Alt-A mortgage loans, which are low- or no-documentationh loans aimed at more credit worthy borrowers. "Some of us tip-toedr into Alt-A," Humann said. "But thosd also fell into the category that nobody toldthe truth." That collapsew caused lenders and investors to pull back from the creditr and debt markets, which drive business expansion. The panelists noted most predictionxs of anymarket recovery, or collapse, don't extenxd beyond a few months.
They had few answersa on what could be done to recover in the mortgagw industry and broader credit Dorfman recommended expanding the capacity of government sponsoredc mortgage programs like the FederalHousingy Administration's home loan program and Ginni Mae, the Government National Mortgage Association, and doing whateve r is possible to spur investment in the financialo markets. "The question isn't subprime, its dead. The marke solved that," he said. The panelists noted a broader economic slowdown looms because consumers appear to be increasingly constrained in their abilityto spend. But others noted signsw of optimism exist.
Lockhart described the current credigt marketas "evolving positively, but still quit e fragile and vulnerable to but working through the credit crunch of fall 2007. All notex the housing market would rebound, and precipitate a broader restoratiobn of trust between borrowersand lenders. None could say when that woulsd happen. "It will take a while, potentially a very long said Humann. "The bright spot is that housinhis forever," Dorfman said. "They ebb and flow, but they'res not temporary like hula hoopsand they're not juice extractors. But between this day and that next wehave problems.
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