Fed Chairman Blames Foreclosures For Home Price Drops, Says Public and Private Sectors Can Fix the Market
- May 06, 2008
New York–U.S. home price declines can be linked to the high foreclosure rate, and the country needs a joint government and private-sector approach to correct the housing slump, Federal Reserve Chairman Ben Bernanke said Monday.Speaking to the Columbia School of Business in New York, Bernanke used a set of maps that illustrated delinquency rates, job reductions and home price fluctuations, CNNMoney.com reports.”Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment,” Bernanke said.Compared to a year ago, foreclosures rose 112 percent in the first three months of 2008. Some fear the situation may worsen as 1.8 million mortgage rates reset this year.In areas where unemployment has declined–such as California and Florida–delinquencies have grown, driving prices down, according to Bernanke. He also said loans requiring low or no down payment, which were used frequently during the housing boom in high-cost housing markets, were responsible for increasing the amount of foreclosures.Bernanke suggested community groups work to buy and revamp vacant homes while lenders and mortgage servicers counsel at-risk borrowers on additional options. New, more transparent and secure lending practices also would help prevent future issues, he said.