A hearing held by House lawmakers Wednesday with ""Federal Reserve"":http://www.federalreserve.gov/ Chairman Ben Bernanke recast housing and the Dodd-Frank Act as issues critical to the economic recovery.[IMAGE]
In his opening remarks, the central banker said that ""affordability has increased dramatically as a result of the decline in house prices and historically low interest rates on conventional mortgages"" but that ""many potential buyers lack the down payment and credit history required to qualify for loans.""
Bernanke said that 30 percent of home sales recently consisted of foreclosures and properties in distress, reflecting ongoing trouble for a market underpinned by high home vacancy rates and downward pressure for home prices.
The underwriting process, down payments, and pending regulations took center-stage during the discussion, with members of the ""House Financial Services Committee"":http://financialservices.house.gov/ spotlighting[COLUMN_BREAK]
servicer consent orders and the role of government in the secondary market.
Rep. ""Judy Biggert"":http://biggert.house.gov/ (R-Illinois) fronted the issue of the Federal Housing Administration, Fannie Mae, and Freddie Mac by asking Bernanke whether taxpayer-funded guarantees for residential mortgages created a healthy economy.
The Fed chairman replied by saying that an oversize role for government agencies in mortgage markets is ""obviously not healthy"" for the economy.
He said that ""uninsured securities... put together by non-GSE securitizers are not yet as appealing as before"" the financial crisis.
Biggert also went after Dodd-Frank ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô notably with Rep. ""Barney Frank"":http://frank.house.gov/ (D-Massachusetts) seated at the same hearing ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô asking whether rules and regulations could ""hurt or help"" the return of private capital to mortgage markets.
""It's important to create more certainty and we're not there yet"" with rule-writing, he said, suggesting that regulatory agencies need ""greater clarity"" to resolve questions over the risk-retention rule.
Rep. ""Maxine Waters"":http://waters.house.gov/ (D-California) raised the issue of the $25-billion servicer settlement and recent consent orders for the nation's five largest banks, asking whether servicers will be able to write down loans to ""satisfy the penalties levied by the Fed in response to their unsafe and unsound practices.""
Bernanke replied by saying that ""the banks will have to verify that they produce their own holdings and their own assets by the amount of credit they take out. If they don't meet those full amounts [in the consent orders,] they will have to pay the rest.""