Home > Mortgages > Bank Regulator: Recovery Impossible Until We Solve the Housing Crisis

Comments 0 Comments

A leading bank regulator spoke out last week about the sorry state of the housing market. And while she tried to make it sound upbeat, Federal Reserve Board Governor Elizabeth A. Duke’s assessment made two things clear:

  1. The situation is very bad.
  2. It’s not going to get better any time soon.

Among the problems? Only a small fraction of the people eligible for low mortgage payments through a government program have received any help. Lenders, not homeowners, own about 1 million homes. And about 50,000 of those lender-owned homes are basically worthless.

[Featured Product: Looking for credit cards for bad credit?]

Until we solve these problems, Duke said, the housing market and the rest of the economy will continue to struggle.

“Regardless of how we got here, we, as a nation, currently have a housing market that is so severely out of balance that it is hampering our economic recovery,” Duke said Thursday in her speech to the Federal Reserve Board Policy Forum.

So how would Duke fix these problems? First, she would tweak the federal government’s broken mortgage modification program to remove fees and conflicts of interest that currently prevent lenders and insurers from participating. Only 800,000 households have received lower mortgage payments from the Home Affordable Modification Program, 20% of the program’s original goal.

“One way to reduce the flow of foreclosed homes is to ease the payment strain on borrowers, which can be accomplished by modifying loans that are past due or by refinancing performing loans at lower rates,” she said.

[Featured Tool: Get your free Credit Report Card from Credit.com]

Next, Duke suggested more government help for converting single-family homes into rental properties. That might include a program that reduces conversion costs by aggregating multiple properties in a small geographic area and selling them as a unit to investors.

But what to do with all those properties valued at $20,000 or less, which are unlikely to be sold at a profit, whether the homes are converted to rentals or not? Duke suggested the government explore options to place properties into land banks so that local officials can decide which ones to rehab, sell or demolish.

In all of these cases, the goal is the same, Duke said: help investors, homeowners and neighborhoods stabilize their finances before looking for long-term solutions.

“Because it likely will take several years for the overhang of vacant homes to be sold,” she said, “such a strategy would help some communities deal with the short-term crisis and then ultimately allow for the disposition of properties in a manner suitable to local market conditions in the longer term.”

[Related: Medication for Middle-Class Mortgage Mania]

Image: Phil Scoville, via Flickr.com

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team