Bernanke urges cautious mortgage choices

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2:56 p.m.

Consumers must continually sharpen their assessments of whether certain mortgages or other investment products make sense for them, Federal Reserve Chairman Ben S. Bernanke recommended today.

"Some evidence, including recent Federal Reserve research on consumers holding adjustable-rate mortgages, suggests that awareness could be improved, particularly among borrowers with lower incomes and education levels," Mr. Bernanke said in prepared remarks to a Washington conference on community development.

As the credit market has grown and become more sophisticated, lenders have been able to extend credit to households and businesses that previously might have been considered uncreditworthy, he said.

In turn, the market for "subprime" borrowers -- people with weaker credit records who are considered higher risks -- has grown considerably over the years.

In 1994, fewer than 5 percent of mortgage originations were in the subprime market. But by 2005, about 20 percent of new mortgage loans were subprime, Mr. Bernanke said.

He also said that making sure that every American has a chance to improve his economic standing through hard work, saving, entrepreneurship and other activities is essential to building economically healthy communities.