Yesterday an US housing official said that the US mortgage default rates is stabilizing. The housing official also said that she never expected that the cut in the US mortgage interest rates last week would turnout to be so important and affect the number of defaults so aggressively.

Darlene Williams, assistant secretary of US Housing and Urban Development said that it has already been made clear that the authorities are moving forward to support the nation's economy when the last week Federal Reserve unexpectedly cut down half point of its key interest rate.

The main matter of concern has been the few specific segments of the credit markets which have become stagnant as the lenders and the investors are scared that they may not get the money back because of the increase in defaults on mortgage loans. The lenders, banks and investors are taking their hands out or this, especially because of the sub prime borrowers with poor credit records.

Uncertainties over the tightening credit disturbed the stock markets all over the world during the month of August and carried into September. The Dow Jones industrial average, which closed at a record 14,000.41 on July 19th, fell down by 8.2 percent during the middle of August. The index again went up and bounced back 3.1 percent after the interest rate cut by Federal Reserve on last Tuesday, September 18.

Williams hopes that the Federal Reserve's interest rate cut would give some indication to the public that the government is worried and is trying to find out some reasonable solutions, so that the market can relax. She ensured that the market is correcting, but she also said not to expect any dramatic changes in the rate of defaults. She says that the economic fundamentals are comparatively strong now. The loan defaults are almost half of what they were during the 1980s and the interest rates are also very low compared to what it was during the 1980s.

Williams think that even though the current crisis in the credit market the sub prime mortgages must stay as they play a very important role in increasing home ownership in United States. She added that not all the sub prime loans end up with foreclosure. Almost 5 percent of the entire US mortgages are sub prime and only one fifth of those sub prime mortgages are under the risk of default. She hoped that the US congress will pass Federal Housing Administration, reforms to expand federal backing of mortgages.

The reform would allow the FHA, which insures mortgages for low- and middle-income borrowers, to back refinanced loans for tens of thousands of borrowers default on payments because their mortgages have reset to higher rates from low initial levels.

The government is all set to put on efforts to encourage financial literacy, and it is taking every step to stop predatory loans that target low-income or minority borrowers. Since most people with unaffordable sub prime loans never go to a counsellor and many did not even read the contract, the Government feels the need to encourage these financial literacy and counselling programs to avoid such problems.