WASHINGTON — Federal Reserve Chairman Ben Bernanke called on the government Thursday to ramp up efforts to stem soaring home foreclosures, which are feeding into the country’s deep economic troubles.
Although a flurry of actions has been taken to ease the housing crisis, foreclosures remain “too high” with adverse consequences for struggling homeowners, squeezed lenders and the broader economy, Bernanke said in remarks to a Fed conference on housing finance.
“More needs to be done,” he said.
Lenders appear to be on track to initiate 2.25 million foreclosures this year, up from an average annual pace of less than 1 million during the pre-crisis period, he said.
To provide additional relief, Bernanke outlined a number of what he called “promising options” to reduce preventable foreclosures.
Under one plan, Bernanke called on Congress to ease the terms of a government program called “Hope for Homeowners,” which lets distressed homeowners refinance into more affordable, federally insured mortgages if the lender writes down the amount owed on the mortgage and pays an upfront insurance premium.
Bernanke suggested Congress lower the lender’s upfront insurance premium as well as reduce the interest rate borrowers pay, which presently is quite high — roughly 8 percent. To bring down this interest rate, Treasury could buy Ginnie Mae securities, which fund the mortgage program, or Congress could decide to subsidize the rate.
Bernanke stressed the importance of curbing the foreclosure mess because it is inter-linked with the economy’s health.
“Weakness in the housing market has proved a serious drag on overall economic activity,” he said. “Steps that stabilize the housing market will help stabilize the economy as well.”
Fielding questions after his speech, Bernanke didn’t foresee government intervention specifically aimed at boosting sagging home prices.
“I don’t think we would be either willing or able to target house prices. I think that would probably be an impossible thing to do given the size of the national housing market,” Bernanke said.
