National Foreclosure Update

On Monday, Federal Reserve Chairman, Ben Bernake gave the go-ahead for congressional efforts to help homeowners in the ongoing foreclosure crisis.

At the Columbia School of Business in New York, Bernake said, “Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy.”

Legislation to assist homeowners facing foreclosure is currently making it’s way through the House of Representatives.

House Financial Services Committee Chairman, Barney Frank, a Democrat from Massachusetts, has supported the bill.

The legislation would allow the Federal Housing Administration to back $300 billion in refinancing loans for homeowners facing foreclosure.

Some experts have opposed the measure by saying that it punishes homeowners have not overextended themselves.

However, the support of Bernake will help Frank to convince the necessity of the bill.

Bernake also mention that if a homeowner wants to stay in the home, “The economic case for trying to avoid foreclosure is strong.”

He continued, “It is important to recognize that the costs of foreclosure may extend well beyond those borne directly by the borrower and the lender.”

He also said, “Clusters of foreclosures can destabilize communities, reduce the property values of nearby homes, and lower municipal tax revenues.” Also, foreclosures can drive housing prices lower.

Frank has stated that he will add measures from the White House to the bill to encourage support from both parties.

One measure that is highly supported by the White House is a reform of the FHA and new regulations that would allow it to increase the scale of its lending. Another is to give more power to the federal government to supervise the actions of Fannie Mae and Freddie Mac.

Bernake has vehemently supported those provisions.

He mentions that Fannie and Freddie “could do more” to aid the current housing crisis.

He contends that the two agencies need to raise more capital, “which they will need to take advantage of these new securitization and investment opportunities, to provide assistance to the housing markets in times of stress, and to do so in a safe and sound manner.”

During his remarks, Bernake did not address general economic concerns.
Last week the Federal Reserve Bank cut interest rates by another quarter of one percentage to 2.0%. Experts believe that the Fed wants to stabilize interest rates for the short term.