by Calculated Risk on 5/10/2006 05:08:00 PM

From Reuters: Fannie CEO frets about adjustable mortgages

Fannie Mae's chief executive said on Wednesday the U.S. housing market will face significant resetting of adjustable rate mortgages over the next two years and he worries about this sparking foreclosures in some locations.
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"If jobs are pretty stable, if home prices have come up underneath the mortgages to support them and if there's not any incidence of appraisal fraud, it could be just fine," [Daniel Mudd, president and chief executive officer] said. "If in certain geographies, some of those factors are different -- there's some appraisal fraud, or there's an economic downturn or home prices have declined -- it could be a very different scenario.

"In that case, what you'd worry about, really on a neighborhood-by-neighborhood basis, is you have a foreclosure here and you have a foreclosure there and soon you've got four foreclosures on the market and you've got plywood on the windows and that could have a very deleterious effect," on the market, Mudd said.