Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (30340)	3/4/2008 11:51:34 AM
From: elmatador	Read Replies (1) \| Respond to of 218255

Bernanke urges 'vigorous response' to housing crunch. 150bn was not enough. Low interest not enough. System no longer responds, I keep saying. I would like to know what viogours measures are on store. Bernanke urges 'vigorous response' to housing crunch. Federal Reserve chairman Ben Bernanke called Tuesday for a "vigorous response" to help stem rising home foreclosures, saying some banks and lenders could do more to help ease the US housing crunch. Bernanke said banks have ratcheted up their efforts to help homeowners threatened with foreclosure, but he stressed that more needs to be done, according to remarks prepared for delivery to a meeting of bank executives in Orlando, Florida. "This situation calls for a vigorous response," the Fed chairman said, while warning that "delinquencies and foreclosures likely will continue to rise for a while longer." "Although lenders and servicers have scaled up their efforts and adopted a wide variety of loss-mitigation techniques, more can, and should, be done," America's top central banker said. Bernanke said additional measures to help reduce a mounting wave of home foreclosures would not only benefit stressed borrowers and their communities, but also the broader economy. The Fed chairman told representatives of the Independent Community Bankers of America that in instances where it is not possible to refinance a home loan, the "next-best solution" may be some type of loss-mitigation arrangement between a lender and a stretched borrower. "Loss mitigation is made more attractive by the fact that foreclosure costs are often substantial," he said. Bernanke said it might be preferable for banks to to write down some principal on a troubled home loan rather than pursuing a foreclosure process which can trigger "substantial" costs. The Fed chairman said repossessed properties sometimes do not sell at a market rate, particularly if they have been vacant for some time. The two-year-long US housing downturn has hit Americans who signed up to subprime home loans especially hard. Subprime loans were granted to people with poor credit during a multiyear housing boom that petered out in late 2005. Such loans have experienced high default rates, partly as the interest rates on some subprime loans have reset to higher rates. More than one-fifth of the 3.6 million subprime adjustable-rate mortgages (ARMs) outstanding were "seriously delinquent" at the end of 2007, Bernanke said. He said some banks have told Fed officials they are reluctant to write down the principal balance owed by a borrower on a home loan, but he said a partial writedown may be preferable to absorbing potentially heftier losses down the road if a home is repossessed. "When the mortgage is 'under water,' a reduction in principal may increase the expected payoff by reducting the risk of default and foreclosure," Bernanke said. "We could also reduce preventable foreclosures if investors acting in their own self-interests were to permit servicers to write down the mortgage liabilities of borrowers by accepting a short payoff in appropriate circumstances," he said. The Fed has aggressively cut US interest rates since September by 225 basis points in a bid to underpin slowing economic momentum which has been partly derailed by the housing downturn. Some economists fear the world's biggest economy could be on the cusp of a recession. The central bank's federal funds short-term interest rate is presently pegged at 3.00 percent and many economists expect Fed policymakers to cut rates again at March 18 meeting. Bernanke said it might be more beneficial for banks to consider trimming a troubled borrower's interest rate on a home loan rather than sanctioning a principal writedown. "The fact that most mortgages terminate before maturity either by prepayment or default may favor an interest rate reduction," he said.