| Page 2 of 2 < |
Bernanke Stirs Pot On Home Loan Help
Fed Chairman Ben S. Bernanke didn't endorse a specific proposal.
(Brendan Smialowski - Bloomnerg News)
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Yesterday, Bernanke said FHA could go further.
He suggested ways for the agency or Congress to help reduce interest rates on Hope for Homeowners loans, currently at roughly 8 percent. He also said the agency might consider reducing the premiums lenders and borrowers pay.
Another option Bernanke highlighted would have the government purchase delinquent loans in bulk and refinance them into an FHA program.
The fear inside the agency and among those who follow it has been that with its current resources, the FHA may not be able to handle its expanded workload or relatively new programs that require it to take on riskier loans. The agency's share of loans dropped sharply during the housing boom and has spiked in the past year as other sources of credit tightened. FHA officials have said staffing and technology have not kept up.
Yesterday, Bernanke acknowledged the capacity issue and raised the possibility of hiring outside contractors to ease the workload.
The desire to stem foreclosures "does not rely solely on the desire to help people who are in trouble," Bernanke said, but rather the need to reduce the supply of these deeply discounted foreclosures, which have dragged down home prices and destabilized entire communities and the economy.
Economists highlighted the historic climb -- and then drop -- in home prices in many parts of the country as a key contributor to the foreclosure mess.
Paul Willen, a senior economist at the Federal Reserve Bank of Boston, said financial analysts predicted a few years ago that delinquencies would soar if there were huge price drops.
"The problem is they didn't believe that [price drops] would happen," Willen said at yesterday's conference.
As home prices kept plunging, more borrowers owed more than their homes were worth. Those who suffered a financial blow, such as a job loss, defaulted on their loans because they could not refinance their way out of trouble or sell their homes.
