The FED Suggests New Way to Lower Foreclosure Rate

photo credit: NailaJ

The Federal Reserve suggested that the federal government and banks should reduce the mortgage principles of struggling homeowners, known as "principal write-downs," as opposed to reducing monthly payments by lowering the interest rates and extending loan terms.

This arose from a discrepancy of information put out by the Census Bureau. The Census Bureau published a report stating that the national homeownership rate fell from 69 percent in 2006 to 67 percent in late 2009. The FED, completing their own study, disagrees with the Census Bureaus information and said that the numbers are a cause for concern. The Federal Reserve puts the homeownership numbers at nearly 62 percent and said that more needs to be done to help homeowners stay in their homes.

Of course there was opposition from the Mortgage Bankers Association. Their chief economist, Jay Brinkmann said that these "principal write-downs may prevent more people from owning homes. He contends that lenders would have to raise down-payments and tighten lending standards to offset the risk of falling property values. "So principal write-downs could lower homeownership going forward," Mr. Brinkmann said.

This argument sounds more like a banking system unwilling to put them selves out, at all, in order to help homeowners, their customers. Of course nobody is in the business of loosing money; no one argues that, but in order to find long term solutions to problems sometimes you need to tighten your belt in the short term.

Not the banking system though, their so unwilling to loose money that even when they fail in business they still want their money, and asked the very people they refuse to help to bail them out. Doesnt seem like a win-win situation. I guess if its a win-lose situation it doesnt matter as long as you are on the winning side.

Read the full article from the New York Times

Posted on July 21, 2010 12:07:39 by Blog Author