Top Fed Official Makes Strong Pitch for More Aggressive Housing Policies Including Targeted Principal Reduction Program
Washington, DC (Dec. 16, 2011)—The President of the New York Federal Reserve Bank today called for much more aggressive action to address the nation’s housing crisis, including a targeted program to reduce the principal of certain mortgages in order to bolster the nation’s economic recovery and serve the long-term interests of U.S. taxpayers.
Testifying in response to questions by Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, William C. Dudley, the President of the Federal Reserve Bank of New York, explained why more aggressive measures to address the current housing crisis are so critical to furthering the nation’s economic recovery:
If you took these steps, I think you could stabilize housing prices. And if you stabilize housing prices, I think you’d actually start to see more demand for housing. And if you saw more demand for housing, then housing prices would start to go up. And that would actually bolster household confidence because houses are a very large component of the household balance sheet. So if home prices are stable or rising, people are going to feel a little bit better about the outlook, not just for housing, but also about their own willingness to go out and spend and consume. So we think this would be very favorable for the housing sector.
President Dudley then explained that targeted programs to reduce mortgage principal would serve the interests of American homeowners and taxpayers alike:
We think that you can devise a program that, for home buyers that have mortgages that are under water, to incent them to continue to pay on those mortgages by giving them some program of principal reduction. Obviously the devil’s in the details, so you have to have good program design. But we are confident that one can design a program, which would be net beneficial—net positive—to the taxpayer.
At a previous hearing before the Oversight Committee on Nov. 16, Edward DeMarco, the Acting Director of the Federal Housing Finance Agency (FHFA), testified that he had analyzed these issues and concluded that principal reduction programs would not serve taxpayer interests. Cummings sent a letter to DeMarco requesting the analysis supporting his assertion, but to date DeMarco has failed to provide the requested analysis.
In response to today’s testimony, Cummings said: “Today’s call for action by President Dudley underscores the urgency of addressing the housing crisis in order to bolster the entire nation’s economic recovery. Yet, FHFA stubbornly refuses to follow its statutory mandate to maximize aid to homeowners and conserve taxpayer resources invested in Fannie and Freddie. We need strong action, and we need it immediately.”
President Dudley’s testimony today follows increasingly urgent calls for action by other Fed officials. In September, for example, Elizabeth Duke, a Governor of the Federal Reserve System, stated: “Regardless of how we got here, we as a nation currently have a housing market that is so severely out of balance that it is hampering our economic recovery.”
Similarly, in November, Janet Yellin, the Fed’s Vice Chairman, stated: “Monetary policy is not a panacea, and it is essential for other policy makers to also do their part. In particular, there is a strong case for additional measures to address the dysfunctional housing market.”
President Dudley’s testimony today before the Oversight Committee follows a speech he gave at West Point on Nov. 17 recommending measures to “enable borrowers who are ‘underwater’ on their loans, but continue to make their monthly payments, to earn accelerated principal reduction over time.”
More and more economists also agree that principal reduction is necessary to address the housing crisis.
SOURCE: http://democrats.oversight.house.gov
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What about selling a house they can never own because the house does not have a clear titile? Who is he kidding. Are they going to have a moritorium on titles and claim from this day foreward whom ever is in possession of the house owns it? Who are they kidding ? They have muttled up everything!
I received a Pre -Qualification notice from the U.S GOV. and the FTC which states they have created a “strict set” of guidelines for Loan Modifications and Approval Standards..If you meed the criteria and your app is submitted in full and correctly, your lender must approve your modification….The benefits to you may include forebearance! and/or foregiveness of past due payments! in addition, to a reduction of your monthly payment! Their debt is unsustainable is what a very reputable attorney told me, don’t sign or agree to anything..I agree with that attorney, as the fraudsters debt is an estimated $700 trillion in mortgage fraud debt, their debt can never be repaid no matter how many fraudulently induced mortgages they collect or how many homes they steal…. Time to shut down the TBTF and stop robbing the little guy to pay for all of their fraud…! Hold them all accountable including the traitor Politicians who allowed this…!
They are just looking for more poker chips (suckers) to use at their Wall Street Casino…Don’t think for a minute they won’t bundle these up and sell interests in these to their criminal friends…these will be known as the stupid sucker, we set you up again to fail derivatives…!
It is hard to trust any of the government plans, so far all of them have been used against us every one., and you certainly can not trust the banks or servicers or debt collectors. All they want is for you to sign you owe the debt and even if you did not you do now! If any of this makes you admit a debt you dont owe and that is most of us, cause of the fraud and crime. Not just the mortgage but the lost income caused by these predators. They all seem to forget they owe us lost income and a lost America. It is not just the house! It is the ruin of America!
Michael Savage Explains Financial Crisis & Communism:
Angry and not taking it and everyone, check out the Michael Savage videos…This man tells it like it is…They took him off the air here in Chicago not long after he made the remark that “All roads lead to Rome.” It was not long after Rahm Emanuel became Mayor…He is now on a radio station that gets no reception here in Chicago…! More proof this is an illegal and unconstitutional tyranny we are all living under!
In some areas homeowners need their alleged principles slashed in half, the entire industry lies as one, particularly in the hardest hit neighborhoods where vultures come in and seize a house for pennies. In other words, housing prices are still too high, and real ‘recovery’ means serious damage to the FIRE sector, so they will never be able to pull this again. The out of control machine will never stand by and accept any real regulation – we’ve seen how they completely dominate every attempt to do so.
So, we have this uber-banker say something completely sensible. And all the bankster lobbyists and their crooks on Capital Hill will start to squeal about moral hazard and this comes when they hold homeowners in their bloody talons for years and they’ve been bailed out in the trillions! ?
The same idiots who gutted regulations, simultaneously waged attacks to make it harder for Americans to declare bankruptcy and hold onto their greatest asset. One must pause and reflect, why has power in this country started to treat so many citizens like criminals?
Susan Templeton, Yeah right, sign up to fail…right here right now with a new fraudulently induced mortgage payment that will fail, and when it does, you will lose your home in 3 months…This economy sucks!…and this is yet another set up to fail for homeowners and an attempt to clean up their fraud mess….There is not enough money in the world to repay their $700 trillion in mortgage fraud debt!
DeMarco seemed to be more interested in his own income and staff making millions at this opportutnituy than hw was making something gell.
As I suspected, it is designed to help those who are still paying, having not defaulted. It may be a popular point of view morally but the reality is it is the shadow inventory that has bogged down the market for months and months that is placing the competitive REOs on the market competing with normal sales. As an appraiser, I assure you the downward trend is from defaulting homeowners and not those who continue to pay despite being underwater. Those particularly homeowners who are current realize nothing on principal reduction. The only benefit they have is in monthly notes, which requires re-amortization. Think about this people.
This little ditty is designed to SOUND
9rest of story) This little ditty was thrown out to sound good but has little chance of altering the market in reality. Take my word for it, it is the defaulting homeowners that are pulling the market down and will continue to do so. It is not the underwater mortgages.
Have you ever looked at what you are paying back on the mortgage? Yes, thousands more than the loan because it is all interest. So you reduce the principal a little nad what do you have? A little lower note but it is the combination of lower interest rates (current market) and principal reduction and given to those who are already in default that will stem the tide of foreclosures and REOs. Anything less just demonstrates how little the financial sector and Washington know about the housing market in reality!
@talktotennessee: and you are surprised that Washington knows little of the housing market? For heaven’s sake, they don’t even read the bills that they present for passage and with the ridiculous incomes for those loathed people they don’t even have a clue to the real world. You have a combination of both worlds here; not just those in default because just how many of those in default are still in underwater mortgages? Well, my friend, here in Flori-duh I can tell you that about 62% in default are ALSO underwater since one in every 4 homes is in foreclosure here, 13% unemployment rate and the beast continues to grow. Please don’t mix markets and in your profession as an appraiser you should know better than to ‘generalize’ a selected market to the overall contrast. South Flori-duh is even worse than central since at least central has the tourist attractions so less unemployment. These mortgages need to be nullified; not modified or have principal reductions. That’s just another way for them to cover up the fraud!