FED Pushing Creative Solutions To Strengthen Housing Sector

by ritasimpson on January 9, 2012

in Real Estate News

The Fed’s moves in the last few months suggest it may be worthwhile to pursue more aggressive actions in terms of loan modifications, mortgage refinancing and sales of foreclosed properties even if they cause greater short-term losses at Fannie and Freddie, and so by extension to taxpayers. A possible policy option would be for the government to expand existing refinancing efforts “or introduce a new program.”

Beyond Fannie and Freddie, the Fed is considering other politically charged areas, such as principal forgiveness for underwater mortgage holders. While it hasn’t specifically endorsed such a move, the Fed said that “policy experiments in this area would be useful.”

Meanwhile on mortgage modifications, the Fed noted certain types of loan changes “may be socially beneficial, even if not in the best interest of the lender.”

the Fed will try to involve banks more directly in housing-revival approaches, even as it imposes new, more stringent regulatory constraints. One area involves efforts to turn foreclosed homes into rental properties. While this primarily pertains to Fannie and Freddie, the Fed noted that commercial banks as of last September had $10 billion in foreclosed homes on their books. Read more


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