WASHINGTON (MNI) – Assistant U.S. Treasury Secretary Jan Eberly,
the department’s chief economist, Tuesday said “there appears to be
little emerging consensus” on the future of housing policy.

“Continued challenges in the labor market have impacted the housing
market,” she said. “When homeowners are unemployed or underemployed,
they may have difficulty making their mortgage payments or refinancing
their mortgages.”

In a speech prepared for the Annual Conference of the Governor’s
Illinois Housing Authority, Eberly said, “We can’t compare this recovery
to previous recoveries without taking into account the tremendous loss
of wealth” brought about by the decline in house prices.

She echoed Federal Reserve Ben Bernanke in his most recent speech,
last Friday in New York, in which he noted the decline in house prices
cost $7 trillion in wealth, and the collapse of subprime mortgage-backed
securities destroyed much less, $1 trillion, worth.

She said that, “Most analysts estimate that, due to the large
number of distressed mortgages and the slow rate of foreclosure sales,
it would take more than two years to clear the “shadow inventory” of
properties that are not yet on the market.”

The loss of housing wealth affects “consumption and savings choices
and feeds back to the broader economy,” she said. Meanwhile, rents are
soaring, up 8.6% in the Chicago metro area in 12 months. “With average
hourly earnings in real terms falling last year and rents rising, rental
housing is becoming less affordable.”

“I share the concern that I suspect many of you in the audience
have,” she said, “there is so much more to be done and there appears to
be little emerging consensus on how to do it.” She cited Churchill,
saying Americans will always do the right thing “after they have
exhausted all other possibilities.”

Overall, she said, “In the last few months we’ve seen a general
improvement in the tone of the incoming economic measures,” with
employment up and the unemployment rate down to 8.2%. “This decline is
largely a result of people leaving unemployment for employment and is
not a quirk of measurement nor driven by declining participation in the
labor markets,” she said.

She said the administration’s Home Affordable Refinance Program has
helped nearly one million homeowners with Fannie Mae or Freddie Mac
mortgages to refinance and the Home Affordable Modification Program,
recently extended through next year, has “implemented nearly one million
permanent modifications where just 15% of modification have defaulted
out of the program” in a year.

“The conditions in which we are working the housing market now are
without precedent in the U.S. — certainly on a national scale,” she
said.

“It is pointless to look backwards over what we wish had been done
differently — those decisions are made, the past is past,” she said.
“However we have critical choices to make which can and will be the
difference between stealing from the future and investing in it.

** MNI Washington Bureau: 202-371-2121 **

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