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Chair Maloney and Members of the Joint Committee:
I am pleased to be here today to discuss the performance of the nonprime mortgage market as of March 31, 2009, which includes subprime and Alt-A loans.
1 Nonprime loans accounted for an increasing share of the overall mortgage market from 2000 through 2006, rising from 12 percent to 34 percent. Over this period, the dollar volume of nonprime mortgages originated annually climbed from $100 billion to $600 billion in the subprime market and from $25 billion to $400 billion in the Alt-A market.2 However, in the summer of 2007, the subprime and Alt-A market segments contracted sharply, partly in response to a dramatic increase in default and foreclosure rates for these mortgages. As of the first quarter of 2009, approximately 1 in 8 nonprime mortgages were in the foreclosure process. These developments have prompted greater scrutiny of lending practices in the nonprime market, a number of government efforts to modify troubled loans, and proposals to strengthen federal regulation of the mortgage industry.