As we’ve been saying for months now, if there was a way to help the real estate market recover, then the national economy would follow. All these foreclosures and unsold foreclosed properties are an unnecessary weight on the housing market, and are preventing it from being revived.
Finally, Federal Reserve Chairman Ben Bernanke sees the light, and believes there should be a government program that would permit renters to move into the REOs.
Yesterday, Bernanke sent a letter to members on the House Committee of Financial Services which stated that “inefficiencies in the foreclosure and mortgage origination processes are dragging on the economic recovery.”
He didn’t stop there. After offering this insight, his staff went on to propose solutions in an accompanying white paper.
The paper states that foreclosed Fannie Mae and FHA properties would likely get a better loss recovery if they were rented. While homeownership should be promoted, the paper continues, borrowers may have little choice but to rent until mortgage origination requirements are loosened.
Currently, Atlanta has the largest amount of government-sponsored REOs, at 5,000. Los Angeles and three other cities follow Atlanta at about 3,000 each.
The paper does warn the committee that such a program might increase taxes and place a large burden on mortgage servicers and bond investors. However, wouldn’t this be a small price to pay to help boost the housing market and prompt a speedier economic recovery?
We sure think so. Agents, realtors, brokers, and others involved in real estate would probably agree as well. Let us know what you think in the comments below.
You can read more about Bernanke’s proposed program here.