Fed issues housing market white paper

The Federal Reserve Board studied the U.S. housing market to analyze existing problems and suggest possible solutions, saying, “There has been much discussion about the pathway forward, and the Federal Reserve has received questions and requests for our input and assistance.”

The white paper, “The U.S. Housing Market: Current Conditions and Policy Considerations,” calls for increased lending to creditworthy homebuyers, and more loan modifications, mortgage refinancings and short sales to reduce the rising inventory of foreclosed homes and help stabilize the housing industry.

The National Association of Realtors® (NAR), in a response, says it agrees with the Federal Reserve’s findings and, in fact, is already an advocate for the proposed changes.

“As the nation’s leading advocate for homeownership and housing issues, NAR knows that a strong housing market recovery is key to the nation’s future economic strength,” says NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami and the 2002 president of Florida Realtors®. “Improving access to affordable mortgage financing for qualified homebuyers and investors, and aggressively pursuing more loan modifications and short sales is necessary to help reenergize the housing market and spur an economic recovery.”

According to the 2011 NAR Member Profile, 34 percent of Realtors called “obtaining a mortgage,” the primary limitation for clients who wished to buy a home.

The Fed white paper says the current problem with mortgage credit “reflects not only a correction of the unsound underwriting practices that emerged over the past decade, but also a more substantial shift in lenders’ … willingness to bear risk.” However, the Fed says that fixing the current real estate market must not simultaneously repeat the mistakes of the past.

To prevent further foreclosure inventory increases, NAR urges lenders to more aggressively modify loans to keep struggling families in their homes. For homeowners unable to meet mortgage obligations, NAR has urged lenders and servicers to quickly approve reasonable short sale offers to avoid foreclosure.

“Loan modifications and short sales help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers, which is good for everyone,” says Veissi.

The Fed paper also addresses converting foreclosed properties into affordable rentals. NAR supports any change that makes it easier for owner-occupants and small investors to get financing, such as opening the Federal Housing Administration 203(k) program to investors. NAR is concerned about proposed bulk sales of distressed properties, which could lead to greater losses for taxpayers and a negative impact on housing values.

“Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” the Fed’s white paper concludes. “There is unfortunately no single solution for the problems the housing market faces. Instead, progress will come only through persistent and careful efforts to address a range of difficult and interdependent issues.
Source: Florida Realtors®