January 09, 2009 |
|Washington, Jan 08 2009 (IFR) - Boston Federal Reserve Bank President Eric Rosengren today said he supports expanded access to Federal Housing Administration (FHA) lending programs, among other fiscal and monetary efforts to boost the sagging US housing market.|
'Making these programs more accessible to borrowers and banks would help ensure that low and moderate income borrowers can obtain financing, which should help stabilize the market for lower-priced homes,' Rosengren said in comments this evening before the Massachusetts Mortgage Bankers Association.
'Since many banks have been raising their minimum credit score to qualify for mortgages, the FHA may be able to provide loans for borrowers whose credit history is not up to current thresholds, yet have the capacity to make payments,' he added.
He also recommended that Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) work to provide a secondary market for mortgages that reflect the lower costs of funds in many credit markets. 'Further exploration of the GSEs options for pricing and programs may result in additional support to the mortgage market,' Rosengren said.
As for the role of the Fed in all of this, Rosengren cited the central bank's November announcement that it would buy up GSE debt obligations and mortgage backed securities.
'While any extension of direct government assistance to borrowers has potential 'moral hazard' problems, the mere potential for such problems should not automatically derail proposals that are likely to keep temporarily troubled borrowers in their homes,' he said.
Rosengren noted that the economy has contracted 'quite significantly' in the final quarter of 2008, and may continue to do so over the first half of 2009. He warned that holiday sales 'fell short of expectations for many retailers,' and said it's a sign that consumers are spending less.