A very interesting article came out recently over at CQ Politics:
Federal Reserve Chairman Ben S. Bernanke said Wednesday that the central bank remains concerned about slowing economic growth, and he again called on lawmakers to clear housing legislation that could help struggling borrowers.
The collapse of the subprime mortgage market has helped drive a wider credit crunch, and the Fed has become increasingly concerned about the risks of a recession.
Since September, the Fed has cut its benchmark federal funds rate from 5.25 percent to 3 percent, and Bernanke suggested to the House Financial Services Committee that the central bank is open to further rate cuts.
Bernanke said Congress could best help by clearing legislation to overhaul the Federal Housing Administration to “provide a vehicle for refinancing of some of these mortgages.â€
The FHA is a Depression-era agency that helps homebuyers obtain affordable mortgages by insuring the loans.
The Fed chairman also reiterated his call for a comprehensive regulatory overhaul of the housing finance giants, Fannie Mae and Freddie Mac, in an effort to preserve their safety and soundness.
Beyond those measures, “I don’t see any clear and obvious additional steps that could be taken,†Bernanke said.
As part of the stimulus package enacted last month, Congress temporarily increased the size of mortgage loans the FHA can insure and Fannie and Freddie can purchase.
But so far, the House and Senate have been unable to agree on a final FHA modernization bill. Negotiators remain divided over a House proposal to divert income paid to the FHA to an affordable-housing fund.
The House passed a regulatory overhaul of Fannie and Freddie last year, but no comparable legislation has even been introduced in the Senate.
