Federal Reserve Chairman Ben Bernanke, speaking Friday at the International Builders Show in Orlando, Fla., said the wave of creditworthy households that are finding it difficult to obtain mortgage credit or to refinance is hindering an economic rebound in the United States.
As a result, the Federal Reserve has taken actions such as lowering interest rates to record lows in an effort to help boost to the housing industry. Yet, if the very banks who are receiving such favorable funding from the Federal Reserve continue to refuse to lend or remain stingy with lending, then the homeowner (aka consumer) cannot contribute to the rebuilding of the economy.
Obviously, this is no surprise to all of us here in the Real Estate world, but according to HousingWire.com, fewer than half of lenders are offering mortgages to borrowers with a FICO score of less than 620 and a down payment of 10%, even though such loans are within the government-sponsored enterprises' purchase parameters.
HELLO...is it any surprise Chairman Bernacke, that if banks WONT lend, then credible borrowers CANNOT borrow. I am not an economist and I am not a bank, but it sure seems pretty obvious to me here 'on the ground' facing these realities each day in the lives of property owners and would-be property owners.
Chairman Bernacke also examined the disproportionate impact of tightening credit condition on first-time homebuyers, noting that lending to them has dropped precipitously, even in parts of the country where unemployment rates and housing conditions are better than the national average.
"Indeed, the propensity of younger households — headed by adults aged 29 to 34 — to take out their first mortgage has been much lower recently than it was 10 years ago, a period well before the most recent run-up in home prices", said Bernacke.
Housingwire noted that first-time homebuyers are typically an important source of incremental housing demand, so their smaller presence in the market affects house prices and construction. The lack of demand from first-time homebuyers may prevent current homeowners from moving up to larger homes, for example, to accommodate growing families.
"The Federal Reserve, in its supervisory capacity, continues to encourage lenders to find ways to maintain prudent lending standards while serving creditworthy borrowers," Bernanke said.
"But the slow recovery of the housing market and the economy, continued uncertainty surrounding the future of the GSEs and the regulatory environment for mortgage lending, the likely continued absence of a private-label market and more cautious attitudes by lenders are all barriers to rapid normalization of the flow of mortgage credit," Bernanke said.
UNFORTUNATELY, Bernacke did not come out and say that he can or will 'make it happen'. Granted, he only has so much authority to actually induce banks to lend...but SURELY, there is something else that can be done to engage lenders to lend!
Michael Hobbs, PahRoo Appraisal & Consultancy
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