|
Bernanke gives green light to Frank foreclosure bill
By Greg Robb, MarketWatch
Last Update: 10:06 PM ET May 5, 2008
WASHINGTON (MarketWatch) -- Federal Reserve Chairman Ben Bernanke gave the green light Monday to congressional efforts to prevent foreclosures of homeowners caught in the recent sharp nationwide decline in home prices.
"Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy," Bernanke said in a speech at the Columbia School of Business in New York.
Legislation to aid strapped homeowners is making its way through the House of Representatives.
The bill has been pushed by House Financial Services Committee Chairman Barney Frank, D-Mass.
It would allow the Federal Housing Administration to back as much as $300 billion in refinanced loans for homeowners facing foreclosure.
Some have questioned the need for the measure, saying that it would punish homeowners who played by the rules and didn't overextend themselves.
Bernanke's support may help Frank sell the measure.
In his remarks, Bernanke said that, "the economic case for trying to avoid foreclosure is strong" if the homeowner wants to stay in the home.
"It is important to recognize that the costs of foreclosure may extend well beyond those borne directly by the borrower and the lender," Bernanke said.
"Clusters of foreclosures can destabilize communities, reduce the property values of nearby homes, and lower municipal tax revenues," he said. In addition, foreclosures can drive house prices lower.
Frank said last week that he will add measures pushed by the White House to his bill to ensure bipartisan support.
One measure favored by the White House would reform the Federal Housing Administration and permit it to increase the scale of its lending. The second would be to give stronger powers to the federal government to oversee the affairs of Fannie Mae and Freddie Mac.
Bernanke has been a consistent supporter of those provisions and repeated his endorsement of them in his speech.
He said that Fannie and Freddie "could do more" to mitigate the damage of the housing market downturn.
He urged the two agencies to raise more capital, "which they will need to take advantage of these new securitization and investment opportunities, to provide assistance to the housing markets in times of stress, and to do so in a safe and sound manner."
Bernanke did not discuss the general economic outlook or monetary policy in his remarks
Last week the Fed trimmed interest rates another quarter of one percentage point to 2.0%. Many economists believe the Fed wants to hold interest rates steady over the near-term. See full story
|