By Ian McKendry
WASHINGTON (MNI) – The foreclosure backlog is weighing on the
housing market and tight credit standards are preventing potential
buyers from purchasing homes, Federal Reserve Chairman Ben Bernanke said
Wednesday.
Bernanke, answering questions from the media following the release
of the Fed’s June FOMC statement and updated projections said he would
like to see the disposition of homes in foreclosure sped up in order to
“clear the market.”
Bernanke said he would like to see mortgage modifications when
“appropriate,” but said it is important to speed up the process to
“give people confidence that they can buy and not be buying into a
falling market.”
“As regulators, we have recently issued cease and desist orders to
servicers we work with, regulated banks, to ask them to do modifications
where appropriate and to manage their REO, owned real estate, in a
economy supportive way,” Benranke said.
He also said that tighter lending standards have locked out a
substantial number of potential buyers saying “roughly about the bottom
third of people who might have qualified for a prime mortgage in terms
of FICO scores a few years ago cannot qualify today.”
“That’s an important problem,” he added.
However, Bernanke did say housing may be better than overall
national numbers are indicating.
He said housing prices for homes that are not distressed sales,
which make up about 30% of the market according the National Association
of Realtors, are more stable.
“That suggests if we can reduce the current number of more than a
third, maybe 40% of home sales which are on a distressed basis, that
would do a lot,” Bernanke said.
“The housing sector is important to the overall recovery so we’ve
paid a lot of intention to that,” Bernanke said.
** Market News International Washington Bureau: 202-371-2121 **
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