By Michael Stubel

January 17, 2012

Throughout the week, the BPC Housing Commission will highlight news articles that address critical developments in housing policy. Any views expressed in the content posted on this forum do not necessarily represent the views of the Commission, its co-chairs or the Bipartisan Policy Center.

Senate Republicans Criticize Fed on Housing Advocacy

By Alan Zibel
The Wall Street Journal

"Top Federal Reserve officials came under fire on Capitol Hill on Tuesday as Republicans criticized the central bank for advocating more steps to aid the battered U.S. housing market. In a letter sent to Fed Chairman Ben Bernanke, Sen. Orrin Hatch (R., Utah) criticized a paper published by the Fed last week that called for more action to stabilize the troubled sector of the economy. The paper, an unusual step for the Fed, came as officials at the central bank have worried that millions of Americans can’t refinance their home loans and take advantage of low interest rates engineered by the central bank. However, Hatch argued that the Fed shouldn’t move so aggressively into housing policy. Publishing a paper and advocating policy positions on housing oversteps the central bank’s mandates of keeping unemployment and inflation low, wrote Hatch, the top Republican on the Senate Finance Committee." Read more here.

By Paul Willen

January 20, 2012

What should the federal government do to address the inventory of foreclosed properties?

View the full forum here.

The views expressed herein are those of the author and do not indicate concurrence by other members of the research staff or the principals of the Federal Reserve Bank of Boston or the Board of Governors of the Federal Reserve System.

Since the subprime crisis appeared five years ago, policy makers have searched for a “game-changer.” Many believed that HopeNow, Hope for Homeowners, HAMP, HARP and large-scale MBS purchases by the Fed had the potential to mitigate the cycle of falling prices and foreclosures. But in the end, the foreclosures have marched on and the crisis has evolved more or less as expected. It was apparent in 2007 that the collapse in house prices over the previous two years had changed the dynamics of the housing market. In normal times, most borrowers have positive equity in their homes and the result of adverse life-events like job loss, illness and divorce is sale but by 2007, falling prices mean that millions of homeowners had negative equity and no longer had an exit strategy. Even in good times, normal transitions in the labor market mean that millions of people lose their jobs every month but after 2007, negative equity mean that those job losses translated, too often, into foreclosures. To eliminate the negative equity problem and restore the market to health, there were basically two options: reduce debt or increase prices. Both have proved exceedingly difficult to achieve.

By Mark Calabria

January 20, 2012

What should the federal government do to address the inventory of foreclosed properties?

View the full forum here.

Since the bursting of the housing bubble, the number of vacant homes, held off the market, has increased over 1.6 million, while the number of vacant homes for sale or rent has increased almost 800,000. Clearly we have a surplus of housing. Not all, but many of these are vacant as the result of foreclosure. Once they have completed the foreclosure process, these homes will add to supply, potentially depressing prices further.

By Joseph Ventrone

January 20, 2012

What should the federal government do to address the inventory of foreclosed properties?

View the full forum here.

REALTORS® appreciate the Administration’s attempts over the last two and half years to keep families in their homes. However, nearly all the federal programs that were put into place have depended on the efforts of large financial institutions to assist consumers. Many of these institutions received vital funding from both the Treasury Department and Federal Reserve Board throughout the economic crisis, but these same institutions have denied similar support for families across the country. One of the key purposes of this extraordinary backing of these institutions was to ensure that liquidity supporting mortgage lending for all types of housing remained throughout the crisis; yet many creditworthy households remain unable to obtain fair and affordable mortgages.