|Fed Chief Speaks About Mortgage Ills, Solutions
In an early March speech to the Independent Community Bankers of America, Federal Reserve Chairman Ben Bernanke discussed the roots of problems in the nation's mortgage market along with measures that might help reduce preventable foreclosures.
"Community bankers are well positioned to contribute to these efforts, given the strong relationships you have built with your customers and your communities," Bernanke said at the group's annual convention in Orlando, Fla.
Fed chief urges workouts
Congress and the White House also temporarily increased the maximum loan value eligible for FHA insurance, which Bernanke said should allow more borrowers—particularly those in communities with higher-priced homes—to qualify for this program and to be eligible for refinancing into FHA-insured loans.
Bernanke also encouraged lenders to consider options including lowering a troubled borrower's interest rate or reducing the principal balance. "In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure," he said.
Data help direct actions
Based on that analysis, NeighborWorks recently distributed $130 million in newly granted funds from Congress to 32 state housing finance agencies, 82 community-based NeighborWorks organizations, and 16 counseling intermediaries around the country, the Fed chairman said.
Difficulty likely to linger
"Real relief for the mortgage market requires stabilization, and then recovery, in the nation's housing sector," Bernanke said. "Modernization of the FHA would be of help on this front as well. I am sure that the FHA and the Department of Housing and Urban Development, given the appropriate powers by the Congress, will make every effort to expand their operations and to help improve the functioning of the market for home-purchase mortgages."
March 25, 2008