Calling on lenders at a banking group meeting in Orlando Florida, Federal Reserve Chairman Ben Bernanke warned that there was still much more trouble ahead for the US housing market and foreclosures.
As reported by the Associated Press, Mr. Bernanke had this to say, "Reducing the rate of preventable foreclosures would promote economic stability for households, neighbourhoods and the nation as a whole. Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss mitigation techniques, more can, and should, be done."
Perhaps the most telling statement made by Bernanke was that in which he said that financial companies should look to reduce the amount of principle that is owed on the mortgage, reducing this so that the homeowner gains back additional equity in their home. He said this would be a better option for lenders than foreclosures on these properties.
As reported by Treasury spokeswoman Brookly McLaughlin by the Bloomberg News, "We're not going to dictate how" – meaning how lenders will alter their mortgage contracts. She finished, "If lenders find that in some cases a principle write-down is less costly than foreclosure, then that is an option they have the incentive to consider."
Bernanke, as well as many other lenders, believes that the numbers of foreclosures will continue to rise over the next several months if other measures are not taken to improve the overall risk that homeowners are facing in the current market.
