Federal Reserve chief has one recipe for housing market
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke has a recipe for helping the housing market: Modify more loans and speed up foreclosures to get rid of a glut of distressed properties clogging the system.
Still, even that approach may be slow going, with persistently high unemployment making would-be borrowers cautious, and tighter credit standards for mortgages locking out the bottom third of buyers who would otherwise take the plunge.
There is "evidently a lot of uncertainty about employment, about the economic recovery and that is affecting people's willingness to make the commitment to buy a house," Bernanke said at a press conference on Wednesday following the end of the Fed's two-day policy meeting.
Although other parts of the U.S. economy have shown signs of recovery, the housing market remains in a slump, with March home prices at lows not seen since March 2003, years before the housing market peaked. Demand for houses is weak and data on Wednesday showed that applications for mortgages fell last week.
The Obama administration and federal regulators are trying to give struggling homeowners a reprieve by permanently modifying their loans. But only a fraction of qualified homeowners are winning lower mortgage payments, housing counselors and consumer advocates say.
"I would like to see just further efforts first of all to modify loans where appropriate, and where not appropriate, to speed the process of foreclosure and the disposition of the foreclosed homes in order to clear the market," Bernanke said.
"Get these homes out of the pipeline and allow people to operate in a market where they are more confident that prices will be stable rather than falling," he said.
Aside from using monetary policy to help boost employment, Bernanke said the Fed was also trying to help the housing market by leaning on the banks it regulates to modify loans "where appropriate."
The Obama administration has pulled $45.6 billion from the taxpayer-funded bank bailout program to prevent foreclosures.
Critics, though, say the program is ineffective -- having only permanently modified some 600,000 loans. Republicans call it a waste of taxpayer money and have been trying to kill it.
(Reporting by Rachelle Younglai; Editing by Jan Paschal)
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