Skip to main content

What We're Reading: February 5

Throughout the week, the BPC Housing Commission will highlight news items 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.

Republicans Sharply Question Bernanke for Fed’s Focus on Job Market

By Binyamin Appelbaum

The New York Times

The Fed’s chairman, Ben S. Bernanke, was sharply questioned by members of a House committee about the Fed’s announcement last week that it planned to hold short-term interest rates near zero until late 2014, a measure that the Fed described as necessary to support a faster pace of economic recovery. ‘I think this policy runs the great risk of fueling asset bubbles, destabilizing prices and eventually eroding the value of the dollar,’ said Representative Paul Ryan, the Wisconsin Republican who is chairman of the House Budget Committee… Mr. Bernanke repeated the Fed’s assessment, released last week, that the pace of growth would increase modestly this year, but that the economy still faced significant challenges, including the depressed state of the housing market and the risk that problems in Europe would infect the rest of the world. Read more here.

Obama proposes FHA refi plan

By Polyana da Costa

Bankrate.com

“President Barack Obama has proposed allowing underwater homeowners to refinance their mortgages with FHA-insured loans. The proposed program would extend today’s low rates to homeowners who owe more than their homes are worth. The plan would be similar to the Home Affordable Refinance Program, or HARP, but it would apply to private mortgages that are not owned by Fannie Mae or Freddie Mac. HARP allows refinances only for homeowners whose loans are owned by the two agencies… The proposed program would also require lenders to reduce the principal of mortgages that are greater than 140 percent of the value of the home.” Read more here.

Mortgage modification program will be extended for 1 year, expanded for homeowners with debt

Associated Press

“The government will triple the financial incentives for private lenders to reduce the principal amount of mortgages for homeowners at risk of losing their homes. And for the first time, the government will offer incentives for principal reductions to government-controlled mortgage giants Fannie Mae and Freddie Mac. The three-year old program has strived to help those at risk of foreclosure lower their monthly payments. But it has failed to help more than half of those who have applied lower their payments on a permanent basis. Many have complained that the program is a bureaucratic nightmare.” Read more here.

Housing Commission’s Henry Cisneros discusses Obama’s mortgage refinance plan

CNBC

Click here for more reaction to the administration’s new plan.

Tight-fisted mortgage lenders pressure home sales

By John W. Schoen

MSNBC

“The percent of loans that required “full documentation” declined steadily from 2000 through 2006, hitting a low of less than 60 percent. Those “no-doc” loans were a big part of the reason mortgage bankers made the bad underwriting decisions that created the mortgage mess. Today, nearly 90 percent of mortgage applications require full documentation. That’s much higher than the pre-bubble level. You’ll also have to show a much higher credit score than you did in the go-go days of the housing boom. In a separate report, Mortgage Marvel, an online mortgage-shopping website, analyzed data from more than 700,000 mortgage applications filed last year and found that the average FICO score was 730. That’s a significant jump from the days when borrowers with scores in the high 500s were routinely steered to high-cost subprime loans.” Read more here.

Good housing legislation could save the economy

By Jared Bernstein

The Christian Science Monitor

“I’ve long held that of all the stuff on the White House’s “we-can’t-wait” list?things they can do to help the economy and jobs without going through that legislative death trap formerly known as Congress?housing policy is the one with the greatest potential to actually move the needle. And the most helpful policy in housing is the reduction of mortgage principal for underwater homeowners. Research has clearly revealed that owing more than the value on your home is the strongest predictor of foreclosure, and housing finance analysts widely agree that principal reduction is the best medicine to avoid this outcome. But what does any of this have to do with stuff we could actually do right now? Good question. The answer is that the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, could quickly reduce the principal on millions of home loans they own or insure, without going through Congress.” Read more here.

Economist Shiller on the Crosscurrents in U.S. Housing

By Neal Lipschutz

The Wall Street Journal

“Housing was at the start and heart of the U.S. and global financial crisis and recession. So it makes sense to many that a strong and sustained U.S. economic recovery needs at least stable housing prices after a long period of price declines. Some recent data may be encouraging, but still you ‘just can’t tell’ if that data really are indicative of a housing turning point, said Yale University Economics Professor Robert Shiller, who is, among other things, a noted expert in the field.” Read more here.

Slow going on BofA short sales

By Jay MacDonald

Bankrate.com

“Bank of America’s cash-for-short-sales pilot program to help Florida homeowners stave off foreclosure has been something of a good news/bad news scenario since its debut last October. Under the program, Bank of America offered $5,000 to $20,000 to homeowners who agree to sell their distressed property in a short sale rather than let it slip into foreclosure. Florida, where I live, was chosen for the pilot because we have plenty of foreclosures. The deadline to apply was Dec. 12. If the program shows promise, it may be rolled out in other states.” Read more here.

Canada’s Subprime Crisis Seen With U.S.-Styled Loans: Mortgages

By Andrew Mayeda Bloomberg

“Canadian lenders are loosening standards, offering mortgages similar to U.S. subprime loans that pose an “emerging risk” to financial institutions, according to the country’s banking regulator. Banks and other lenders are becoming ‘increasingly liberal’ with mortgages and home-equity credit lines that don’t require individuals to prove their income, according to 152 pages of documents obtained by Bloomberg News under freedom of information law from the Office of the Superintendent of Financial Institutions. The mortgages, typically granted to the self-employed and recent immigrants, ‘have some similarities to non-prime loans in the U.S. retail lending market,’ the documents show.” Read more here.


“The nation’s home ownership rate fell for the seventh year in a row, nearly touching levels unseen in 14 years.”


Analysts see housing impact on economic recovery as minimal

By Justin T. Hilley

HousingWire

“Don’t expect housing improvements to play a major part in any overall national economic recovery. Because housing now makes up only a small share of the economy, the sector is unlikely to add much more than 0.2% to annual gross domestic product growth in 2012 and 2013, according to analysts at Capital Economics. So although housing may soon support growth, it won’t help much. Normally in the first two years after a recession, residential investment adds an average of 0.7% to annual GDP growth. This time, it has added nothing, they say. If residential investment had performed as well as during past recoveries, then GDP growth in 2011 would have been close to 2.5% instead of 1.7%.” Read more here.

How the Housing Market Could Shape the 2012 Election PBS NewsHour