BEN'S TESTIMONY: MORE BAD NEWS

The Fed Chairman testified yesterday in front of the Senate. His outlook on mortgage was bleak: he acknowledged that all is not well in that sector but did not offer any new ways to get out of the situation. His testimony that can be seen on the Fed's website www.federalreserve.gov/ in its entirety evolves around issues that have been discussed at length in this blog: he admitted that loss mitigation is less costly to the lender and the borrower than foreclosure. He advocated loan modification, temporary forbearance and actions by FHA and community groups. What was missing from his testimony was a bold action such as increasing the loan amounts that Fannie and Freddie could purchase or a moratorium on foreclosures. Such actions would alleviate the pain that jumbo and sub prime borrowers currently endure.

Next year, 450,000 mortgages will reset each quarter creating a nightmare for borrowers who will face higher payments. Ben spoke of credit tightening, declining property values, skyrocketing inventories and deterioration of neighborhoods but still no plan to prevent it. It is time that the Fed and our elected pfficials take some drastic action to prevent further loss. Baby steps rate cuts won't accomplish it.

With the barrel of crude oil hovering around $100.00 and the uncertainty of the economy, we are facing a major crisis and one should expect more from the Fed than what we are getting. The weak dollar is just adding to the problem for an economy that relies so heavily on imported goods.
Ben laid out all our problems but I did not see a real solution being offered.
Write to John Palla at info@p2funding.com